HomeMy WebLinkAbout2011TOWN OF SOUTHOLD
SINGLE AUDIT REPORTS
Year ended December 31,2011
FINANCIAL SECTION
Independent Auditors' Report .................................................................................................................... 1-2
REQUIRED SUPPLEMENTARY INFORMATION
Management's Discussion and Analysis ................................................................................................... 3-14
BASIC FINANCIAL STATEMENTS
Government-Wide Financial Statements
Statement of Net Assets .........................................................................................................................
Statement of Activities ............................................................................................................................
15
16
Fund Financial Statements
Governmental Fund Financial Statements
Balance Sheet and Reconciliation of the Governmental Funds Balance Sheet to
the Statement of Net Assets ............................................................................................................. 17-18
Statement of Revenues, Expenditures, and Changes in Fund Balances and
Reconciliation of the Governmental Funds Statement of Revenues, Expenditures,
and Changes in Fund Balances to the Statement of Activities ........................................................ 19-20
Fiduciary Fund Financial Statements
Statement of Fiduciary Net Assets ......................................................................................................... 21
Notes to Financial Statements .................................................................................................................. 22-45
REQUIRED SUPPLEMENTARY INFORMATION OTHER THAN MANAGEMENT DISCUSSION AND
ANALYSIS
Schedule of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual
General Fund ....................................................................................................................................... 46
Highway Fund ...................................................................................................................................... 47
Community Preservation Fund ....................................................................................... 48
Postemptoyment Benefits Healthcare Costs - Schedule of Funding Progress ................................ 49
OTHER SUPPLEMENTARY INFORMATION
Combining Fund Statements:
Non-major Governmental Funds Combining Balance Sheet ...................................................................................................................
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ........................
DISCRETELY PRESENTED COMPONENT UNITS
50
51
Discretely Presented Component Units:
Combining Statement of Net Assets ...................................................................................................... 52
Combining Statement of Activities .......................................................................................................... 53
OTHER REPORTS
Schedule of Expenditures of Federal Awards ...................................................................................
Notes to Schedule of Expenditures of Federal Awards ....................................................................
Report on Internal Control Over Financial Reporting
and on Compliance and Other Matters Based on an Audit
of Financial Statements Performed in Accordance with
Government Auditing Standards .......................................................................................................
Independent Auditors' Report on Compliance with Requirements That Could
Have a Direct and Material Effect on Each Major Program and on Internal Control
Over Compliance in Accordance with OMB Circular A-133 ..............................................................
Schedule of Findings and Questioned Costs ....................................................................................
54-55
56
57-58
59-60
61-66
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
Honorable Supervisor and Town Board
Town of Southold
Southold, New York
We have audited the accompanying financial statements of the governmental activities, the aggregate
discretely presented component units, each major fund, and the aggregate remaining fund information of the
Town of Southold, New York, as of and for the year ended December 31, 2011, which collectively comprise
the Town's basic financial statements as listed in the table of contents. These financial statements are the
responsibility of the Town of Southold, New York's management. Our responsibility is to express opinions on
these financial statements based on our audit.
We did not audit the financial statements of the seven component units presented discretely in these financial
statements. The financial statements of the Fishers Island Ferry District and the Fishers Island Waste
Management District, which represents 79.9%, 76.8%, and 79.1%, respectively, of the assets, net assets, and
revenues of the aggregate discretely presented component units were audited by other auditors whose report
thereon have been furnished to us and in our opinion, insofar as it relates to the amounts included for those
two component units, are based solely on the reports of other auditors.
Except as discussed in the following paragraph, we conducted our audit in accordance with auditing standards
generally accepted in the United States of America and the standards applicable to financial audits contained
in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a reasonable basis for our opinions.
The financial statements of the other discretely presented component units, which represents 20.1%, 23.2%,
and 20.9%, respectively, of the assets, net assets, and revenues of the aggregate discretely presented
component units were not audited as of the report date, nor were we able to satisfy ourselves as to those
financial activities by other auditing procedures.
In our opinion, except for the effects of such adjustments, if any, as might be determined necessary had those
discretely presented component units been audited, the financial statements referred to above present fairly, in
all material respects, the respective financial position of the governmental activities, the aggregate discretely
presented component units, each major fund, and the aggregate remaining fund information of the Town of
Southold, New York, as of December 31, 2011, and the respective changes in financial position for the year
then ended in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note A.7 to the basic financial statements, the Town of Southold, New York adopted the
provisions of Governmental Accounting Standards Board (GASB) Statement No. 54, "Fund Balance Reporting
and Governmental Fund Type Definitions" as of and for the year ended December 31,2011.
PERSONAL SERVICE. TRUSTED ADVICE, ·
ALBRECHT, VIGGIANQ, ZURECK & COMPANY, PC
245 PARK AVENUE, 24TH FLOOR 25 SUFFOLK COURT
NEWYORK, NY 101&7 HAUPPAUGE, NY 11788 3715
T:212.7924075 T:631 434.9500 F:831.4349518
In accordance with Government Auditing Standards, we have also issued our report dated December 4, 2012,
on our consideration of the Town of Southold's internal control over financial reporting and on our tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters.
The purpose of that report is to describe the scope of our testing of internal control over financial reporting and
compliance and the results of that testing, and not to provide an opinion on the internal control over financial
reporting or on compliance. That report is an integral part of an audit performed in accordance with
Government Auditing Standards and should be considered in assessing the results of our audit.
Accounting principles generally accepted in the United States of America require that the management's
discussion and analysis, schedule of funding progress for other postemployment benefits healthcare costs and
the budgetary comparison information be presented to supplement the basic financial statements. Such
information, although not a part of the basic financial statements, is required by the Governmental Accounting
Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial
statements in an appropriate operational, economic, or historical context. We have applied certain limited
procedures to the required supplementary information in accordance with auditing standards generally
accepted in the United States of America, which consisted of inquiries of management about the methods of
preparing the information and comparing the information for consistency with management's responses to our
inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic
financial statements. We do not express an opinion or provided any assurance on the information because the
limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively
comprise the Town of Southold, New York's financial statements as a whole. The combining and individual
nonmajor fund financial statements are presented for purposes of additional analysis and are not a required
part of the financial statements. The accompanying schedule of expenditures of federal awards is presented
for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133,
Audits of States, Local Governments, and Non-Profit Organizations, and is also not a required part of the
financial statements. The combining and individual nonmajor fund financial statements and the schedule of
expenditures of federal awards are the responsibility of management and were derived from and related
directly to the underlying accounting and other records used to prepare the financial statements. The
information has been subjected to the auditing procedures applied in the audit of the financial statements and
certain additional procedures, including comparing and reconciling such information directly to the underlying
accounting and other records used to prepare the financial statements or the financial statements themselves,
and other additional procedures in accordance with auditing standards generally accepted in the United States
of America. In our opinion, based on our audit and the report of other auditors, the information is fairly stated in
all material respects in relation to the basic financial statements as a whole.
Hauppauge, New York
December 4, 2012
-2-
REQUIRED SUPPLEMENT.ARY INFORMATION
Management's Discussion and Analysis
TOWN OF SOUTHOLD
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31, 2011
As management of the Town of Southold, New York (the "Town"), we offer readers of the financial statements
this narrative overview and analysis of the financial activities for the year ended December 31, 2011. We
encourage readers to consider the information presented here in conjunction with additional information that we
have furnished in our letter of transmittal of this report.
FINANCIAL HIGHLIGHTS
· The assets of the Town exceed its liabilities at the close of 2011 by $100,202,377 (net assets).
· The Town's governmental net assets decreased by $1,771,070. The most notable factor
contributing to this decrease is the ongoing recognition of postemployment benefits healthcare
COSTS.
· As of the close of 2011, the Town's governmental funds reported combined ending fund balances
of $19,580,506. Of this amount, $854,387 is not in spendable form or is required to remain intact.
The remaining of $18,726,119 or approximately 96% of total fund balance is in spendable form with
various levels of spending constraint: restricted, assigned, or unassigned making them available for
spending at the Town's discretion (in compliance with Governmental Accounting Standards Board
(GASB) Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions. See
Note A.4.
· At the end of 2011, the Town's total fund balance for the General Fund was $8,224,732 an increase
of $801,631 or 10.8% from the prior year. The assigned and unassigned (GASB Statement No. 54)
fund balance for the General Fund was $7,527,752, or 28.5% of total General Fund expenditures
and other uses.
· The Town's total bonded debt was $42,485,000, and is an increase of 36% from the prior year.
OVERVIEW OF THE FINANCIAL STATEMENTS
The discussion and analysis is intended to serve as an introduction to the Town's basic financial statements.
The Town's basic financial statements comprise components: 1) government-wide financial statements, 2)
fund financial statements and 3) notes to basic financial statements. This report also contains supplementary
information in addition to the basic financial statements themselves.
Government-wide Financial Statements
The government-wide financial statements are designed to provide readers with a broad overview of the
Town's finances, in a manner similar to a private-sector business. The intent of the government-wide financial
statements is to give the reader a long-term view of the Town's financial condition.
The Statement of Net Assets presents financial information on all of the Town's assets and liabilities, with the
difference between the two reported as net assets. This combines and consolidates the Town's current
financial resources with capital assets and long-term obligations. The purpose of this statement is to give the
reader an understanding of the Town's total net worth. Over time, increases or decreases in the Town's net
assets are one indicator of whether its financial health is improving or deteriorating. You will need to consider
other nonfinancia[ factors, however, such as changes in the Town's property tax base and the condition of the
Town's buildings, roads, drainage and other assets to assess the overall health of the Town.
The Statement of Activities presents information showing how the Town's net assets changed during the most
recent year. Revenues and expenses are reported by activity to give the reader an understanding of how
each of the Town's activities is being supported. All changes in net assets are reported as soon as the
underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus,
revenues and expenses are reported in this statement for some items that will only result in cash flows in
future periods. This method is known as the accrual basis of accounting and is different from the modified
accrual basis of accounting used in the Town's fund financial statements.
The Town's government-wide financial statements includes both the governmental activities of the Town itself
(known as the primary government) and of its legally separate component units for which the Town is
financially accountable. Financial information for all component units is reported separately (discretely
presented) from the financial information presented for the primary government.
-3-
TOWN OF SOUTHOLD
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31,2011
OVERVIEW OF THE FINANCIAL STATEMENTS (continued)
Government-wide Financial Statements (continued)
Governrnenta/ Activities - The Town's basic services are reported here, including: general government
support; education; public safety; transportation; economic assistance and opportunity; cultural and recreation
and home and community services. Property taxes, mortgage taxes, franchise fees, fines, and state and
federal grants finance these activities. The Town also charges fees to customers to help it cover the cost of
certain services it provides.
Component Units - Component units are legally separate organizations for which the Town is either financially
accountable, or the nature and significance of their relationship with the Town is such that exclusion would
cause the Town's financial statements to be misleading or incomplete. All of these entities are reported in a
separate column in the government-wide statements as discretely presented.
tnformation on separately issued financial statements is shown in Note E to the financial statements.
Fund Financial Statements
The fund financial statements focus on current available resources and are organized and operated on the
basis of funds, each of which is defined as an accounting entity with a self-balancing set of accounts
established for the purpose of carrying on specific or attaining certain objectives in accordance with special
regulations, restriction or limitations. The Town, like other governments, uses fund accounting to ensure and
demonstrate compliance with finance-related legal requirements. All of the funds of the Town can be divided
into two categories: governmental funds and fiduciary funds.
Governmental Funds
The Town's activities are reported in governmental funds. Governmental funds are used to account for
essentially the same functions reported as governmental activities in the government-wide financial
statements. However, unlike the government-wide financial statements, governmental fund financial
statements focus on near-term inflows and outflows of spendable resources, as well as on balances of
spendable resources available at the end of the year. Such information may be useful in evaluating a
government's near-term financial requirements.
Because the focus of governmental funds is narrower than that of the government-wide financial statements, it
is useful to compare the information presented for governmental funds with similar information presented for
governmental activities in the government-wide financial statements. By doing so, readers may better
understand the long-term effect of the Town's near term financial decisions. Both the governmental fund
balance sheet and governmental fund statement of revenues, expenditures, and change in fund balances
provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.
The Town maintains ten (10) individual governmental funds. Information is presented separately in the
governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and
changes in fund balances for the four (4) major funds. The General Fund, Highway Fund, Capital Projects
Fund and Community Preservation Fund are reported as major funds. Data from the six (6) other
governmental funds are combined into a single, aggregated presentation.
The Town adopts an annual appropriated budget for its general and special revenue funds, except for the
capital projects fund and special grant fund. A budgetary comparison schedule for the general fund, highway
fund, and community preservation fund can be found in the section labeled "Required Supplementary
Information Other Than Management's Discussion and Analysis".
Fiduciary Funds
A~I of the Town's fiduciary activities are reported in a separate Statement of Fiduciary Net Assets. We exclude
these activities from the Town's other financial statements because the Town cannot use these assets to
finance its operations. The Town is responsible for ensuring that the assets reported in these funds are used
for their intended purposes.
-4-
TOWN OF SOUTHOLD
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31,2011
OVERVIEW OF THE FINANCIAL STATEMENTS (continued)
Notes to the financial statements
The notes provide additional information that is essential to a full understanding of the data provided in the
government-wide and fund financial statements. The notes to the financial statements can be found following
the basic financial statements.
Other information
In addition to the basic financial statements this report contains supplementary information immediately
following the notes to the financial statements.
GOVERNMENT-WIDE FINANCIAL ANALYSIS
As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the
case of the Town, assets exceeded liabilities by $100,202,377 at the close of the most recent year.
Condensed Statement of Net Assets
Primary Governmental Activities
December 31,
Assets
Current and other assets
Capital assets
Total Assets
Liabilities
Current and other liabilities
Long-term liabilities
Total Liabilities
Net Assets
Invested in capital assets,
net of related debt
Restricted:
Land acquisition
Unrestricted (Deficit)
Total Net Assets
2011 2010
$ 41,152,877 $ 26,385,103
150,870,904 144,271,376
192,023,781 170,656,479
24,280,729 17,254,779
67,540,675 51,428,253
91,821,404 68,683,032
112,161,093 108,425,137
10,855,163 6,002,350
(22,813,879) (12,454,040)
$ 100,202,377 $ 101,973,447
Total assets of the primary government as of December 31, 2011 were $192,023,781, an increase of
$21,367,302. Total liabilities as of December 31, 2011 were $91,821,404, which represents an increase of
$23,138,372 from December 31, 2010. This results in a net asset balance of $100,202,377, a decrease of
$1,771,070. Of the Town's net asset balance, $112,161,093 were invested in capital assets, net of related debt
and $10,855,163 was restricted for future land acquisition leaving a $22,813,879 unrestricted deficit.
By far the targest portion of the Town's net assets $112,161,093, reflects its investment in capital assets (i.e.
land, buildings, machinery and equipment, intangibles, and infrastructure); less any related debt used to
acquire those assets that is still outstanding. The Town uses these capital assets to provide services to
citizens; consequently, these assets are not available for future spending. Although the Town's investment in
its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt
must be provided from other sources, since the capital assets themselves will not be used to liquidate these
liabilities.
TOWN OF SOUTHOLD
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31,2011
GOVERNMENT-WIDE FINANCIAL ANALYSIS (continued)
The deficit batance of unrestricted net assets does not necessarily indicate fiscal stress. At the end of the
current year, the Town is able to report a positive balance in the categories of invested in capital assets, net of
related debt, and restricted. The same situation held true for the prior year. The deficit balance in unrestricted
arose primarily due to long-term liabilities which include other postemployement benefits, compensated
absences, claims and judgments and landfitl closure and postclosure costs that will be funded through future
budgetary appropriations when they become payable in future periods.
Changes in Net Assets
Primary Governmental Activities
For the years ended December 31,
Program Revenues
Charges for services
Operating grants and contributions
Capital grants and contributions
General Revenues Real property taxes
Other real property tax items
Non-property tax items
Interest earnings
State aid - unrestricted
Other
Total Revenues
Program Expenses
General government support
Public safety
Public health
Transportation
Economic assistance and opportunity
Culture and recreation
Home and community services
Interest on debt
Total Expenses
increase (Decrease) in Net Assets
2011 2010
$ 3,915,039 $ 3,454,614
1,278,652 1,154,616
1,939,799 3,120,735
7,133,490 7,729,965
29,694,522 29,310,575
94,277 94,923
4,770,088 5,056,210
130,503 185,803
947,121 1,317,314
1,695,355 939,436
37,331,866 36,904,261
44,465,356 44,634,226
9,355,688 8,198,435
18,122,010 16,424,971
33,788 39,276
7,964,250 7,864,050
1,998,220 1,840,981
537,449 483,285
6,815,221 6,622,084
1,409,800 1,313,163
46,236,426 42,786,245
$ (1,771,070) $ 1,847,981
Net assets, from all government activities, decreased by $1,771,070 in the current year.
Key elements of the governmental activities are:
· Overall program revenues decreased by $596,475 from the prior year. Charges for services increased by
$460,425 primarily due to an increase in commercial waste removal due to the Town lowering the
commercial garbage rate which resulted in increased volume. Capital grants decreased by $1,180,936
primarily related to Federal aid received to fund the land acquisitions in the prior year. General revenues
increased $427,605 due to a combination of increased rear property taxes of $383,947, a decrease in
mortgane tax and transfer tax revenue of $656,315 offset by an increase in other revenues of $755,919.
· Overall expenses increased by $3,450,181. The increase is due to the increase in employee benefits of
$2,243,161 which has been allocated to the various functions and the increase in the ongoing recognition
of the OPEB costs.
-6-
TOWN OF SOUTHOLD
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31,201 1
GOVERNMENT-WIDE FINANCIAL ANALYSIS (continued)
Total Cost of Se~ces
Primary Governmental Activities
For the years ended December 31,
Total Coat of S~ices Program Revenues Net Cost of Services
2011 2010 2011 2010 2011 2010
General govemment support $ 9,355,688 $ 8,198,435 $ 568,180 $ 553,277 $ (8,787,508) (7,645,158)
Public ssfety 18,122,010 16,424,971 814,737 742,679 (17,307,273) (15,682,292)
Public health 33,788 39,276 10,193 11,033 (23,595) (28,243)
Transportation 7,964,250 7,864,050 847,046 507,082 (7,117,204) (7,356,968)
Economic assistance and opportunity 1,998,220 1,840,981 472,879 448,066 (1,525,341) (1,392,915)
Culture and recreation 537,449 483,285 222,502 221,361 (314,947) (261,924)
Home and community services 6,815,221 6,622,084 4,197,953 5,246,467 (2,617,268) (1,375,617)
Interest on debt 1,409,800 1,313,163 (1,409,800) (1,313,163)
$ 46,236,426 $ 42,786,245 $ 7,133,490 $ 7,729,965 $ (39,102,936) $ (35,056,280)
The total cost of all governmental activities this year was $46,236,426. The net cost of these services after
being subsidized by program revenues of $7,133,490 was $39,102,936.
$20,000,000
$18,000,000
$16,000,000
$14,000,000
$12,000,OO0
$10,000,000
$8,000,000
$6,000,000
$4,000,000
$2,000,000
$-
Expenses and Program Revenues
Governmental Activities
-7-
TOWN OF SOUTHOLD
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31, 2011
FINANCIAL ANALYSIS OF THE TOWN'S FUNDS
Governmental Funds
Operating grants and
contributions
3%
Other general revenues
15%
Charges for services
9%
State aid - unrestricted
2%
Capital grants and
contributions
4%
Revenue by Source
Primary Governmental Activities
for the year ended December 31,
Real property taxes
State aid - unrestricted
Charges for services
Other general revenues
Operating grants and contributions
Capital grants and contributions
2011 2010
$ 29,694,522 $ 29,310,575
947,121 1,317,314
3,915,039 3,454,614
6,690,223 6,276,372
1,278,652 1,154,616
1,939,799 3,120,735
$ 44,465,356 $ 44,634,226
The focus of the Town's governmental funds is to provide information on near-term inflows, outflows, and
balances of spendable resources. Such information is useful in assessing the Town's financing requirements.
In particular, spendable fund balance may serve as a useful measure of a government's net resources
available for spending at the end of the year.
-8-
TOWN OF SOUTHOLD
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31,2011
FINANCIAL ANALYSIS OF THE TOWN'S FUNDS (continued)
Governmental Funds (continued)
The Town has implemented Governmental Accounting standards Board (GASB) Statement No. 54, Fund
Balance Reporting and Government Fund Type Definitions. As a result of this implementation, the fund
balance section of the balance sheets of the governmental funds has been modified. The change has been
made in order for the Town's new fund balance components to focus on "the extent to which the government is
bound to honor constraints on the specific purposes for which amounts in the fund can be spent". Previously,
the fund balance section focused on whether these resources were available for appropriation. It also
distinguished the unreserved fund balance from the reserved fund balance. In order to show compliance with
GASB Statement No. 54, however, the components of the new fund balance include the following line items:
· Nonspendable fund balance - $854,387 (inherently non spendable) includes the portion of net
resources that cannot be spent because they must be maintained intact.
· Restricted fund balance - $10,855,163 (externally enforceable limitations on use) include amounts
subject to limitations imposed by creditors, grantors, contributors, or laws and regulations of other
governments.
· Assigned fund balance - $5,411,290 (limitation resulting from intended use) consists of amounts
where the intended use is established by the highest level of decision making.
· Unassigned fund balance - $2,459,666 (residual net resources) is the total fund balance in the
general fund in excess of nonspendable, restricted, and assigned fund balance, of $4,212,703 and the
deficit $1,753,037 in the capital projects fund in excess of restricted fund balance.
The implementation of these new components is intended to increase clarity and help service the need of the
financial statement users. See Note B.2 for more information.
The following schedule presents a summary of the Governmental Funds - (General, Special Revenue, and
Capital Projects) revenues and expenditures for the year ended December 31, 2011, and the amount of
change and percentage of total in relation to the prior year.
Increase %
2011 2010 (Decrease) Change
REVENUES
Real property taxes
Other real property tax items
Non-property tax items
Depadmental income
Intergovernmental charges
Use of money and property
Licenses and permits
Fines and forfeitures
Sale of property and compensation for loss
Miscellaneous local soumes
Interfund revenues
State aid
Federal aid
Total Governmental Fund Revenues
29,694,522 $ 29,310,575
94,277 94,923
4,770,088 5,056,210
3,031,325 2,513,430
271,087 222,907
330,249 351,416
448,045 412,723
184,388 225,311
1,392,580 614,216
320,475 415,241
30,000 30,000
1,742,257 1,895,546
2,213,870 3,267,509
$ 383,947
(646)
(286,122)
517,895
48,180
(21,167)
35,322
(40,923)
778,364
(94,766)
(153,289)
1,053,639)
1.3%
-0.7%
-5.7%
20.6%
21.6%
-6.0%
8.6%
-18.2%
126.7%
-22.8%
0.0%
-8.1%
-32.2%
$ 44,523,163 $ 44,410,007 $ 113,156 0.3%
-9-
TOWN OF SOUTHOLD
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31,2011
FINANCIAL ANALYSIS OF THE TOWN'S FUNDS (continued)
Governmental Funds (continued)
2011 2010
Increase %
(Decrease) Change
EXPENDITURES
General government support
Public safety
Public health
Transportation
Economic assistance and oppor[unity
Culture and recreation
Home and community services
Employee benefits
Capital
Debt service principal and interest
Total Governmental Fund Expenditures
$ 5,878,258 $ 5,201,748 $ 676,510 13.0%
10,530,630 9,758,347 772,283 7.9%
33,788 33,788 0.0%
3,650,352 3,384,027 266,325 7.9%
1,165,355 1,118,864 46,491 4.2%
277,281 282,289 (5,008) -1.8%
12,333,966 10,760,705 1,573,261 14.6%
10,234,066 8,559,979 1,674,087 19.6%
1,673,943 1,787,275 (113,332) -6.3%
3,201,012 3,261,848 (60,836) -1.9%
$ 48,978,651 $ 44,148,870 $ 4,829,781 10.9%
The Town appropriated a total of $2,111,000 of prior year balance for the 2011 budget. Total revenues are
consistent with prior year. There was an increase in departmental income of $517,895 due to increase in solid
waste removal revenue and an increase in the sale of property and compensation for loss of $778,364 due to
a large insurance recovery received. These increases were offset by a decrease in federal aid of $1,053,639.
Overall, governmental expenditures increased $4,829,781. The increase is due to the following: increases in
public safety salaries and purchases of equipment of $716,773; a $455,738 increase in hauling fees due to the
Town's decrease in rates which resulted in an increase in volume of solid waste receipts. In addition, there
were increases in community preservation land acquisitions of $1,322,816 and $2,131,776 in employee
benefits primarily relating to insurance benefits of $1,361,979 and retirement benefits of $771,788 with an
offsetting decrease of $363,768 in transfers for medical claims in the current year.
General Fund
The General Fund is the chief operating fund of the Town. At the end of the current year, the total fund
balance of the General Fund was $8,224,732 increasing by $801,631 or 11% from the prior year. Of this
amount, $696,980 is not in spendable for (inventory and prepaid items). The remaining $7,527,752 of the fund
balance is in spendable form as follows: $1,499,060 is assigned for insurance claims; $1,753,178 has been
assigned by the Town Board for the subsequent year's budget and $62,811 has been assigned for purchase
orders by the Town Comptroller, and the remaining $4,212,703 represents spendable, unassigned fund
balance.
As a measure of the General Funds' liquidity, it may be useful to compare spendable fund balance and total
fund balance to total fund expenditures and other financing uses. Spendable and total fund balance
represents 28% and 30% of total General Fund expenditures and other financing uses.
The key elements of the fund balance increase of $801,631 are as follows:
· There was a planned fund balance reduction of $1,914,000, a result of appropriations in the current year's
budget.
· General government support was $1,096,694 under budget due to unallocated insurance and judgment
and claims expenditures $345,206 under budget, $261,596 in buildings and grounds under budget due to
budgeted salaried positions not being filled and improvements budgeted that were lower than anticipated
and the general implementation of expenditure reductions providing additional savings of $489,892.
· Public safety was $788,624 under budget due to the Town budgeting for substantial salary increases due
to the expiration of the PBA contract. Actual costs were considerably lower due to contract negotiations.
· Employee benefits were $762,926 under budget primarily due to the Town budgeting for a significant
insurance claim not knowing the extent of Town's exposure until after the budget was prepared. The
Town's exposure was limited due to their insurance coverage.
-10-
TOWN OF SOUTHOLD
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31, 2011
FINANCIAL ANALYSIS OF THE TOWN'S FUNDS (continued)
Highway Fund
At the end of the current year, the total fund balance of the Highway Fund was $994,520 increasing by $352,054
or 55% from the prior year. Of this amount, $79,494 is not in spendable for (prepaid items). The remaining
$915,026 of the fund balance is in spendable form as follows: $290,000 has been assigned by the Town Board for
the subsequent year's budget, $70,818 has been assigned for pumhase orders by the Town Comptroller, and the
remaining $554,208 is assigned for highway purposes.
The key elements of the fund balance increase of $352,054 are as follows:
· There was a planned fund balance reduction of $228,850, a result of appropriations in the current year's
budget.
· Federal and state aid was over budget by $111,966 resulted almost entirely from a FEMA reimbursement
for storm clean up costs related to Hurricane Irene in late August 2011.
· Transportation savings of $341,230 resulted from lower than normal road stabilization costs.
Capital Projects Fund
At the end of the current year, the Capital Projects Fund had a total fund balance deficit of $1,753,037. The
deficit will be eliminated with the issuance of long term bonds in subsequent periods.
The fund balance increased in the Capital Projects Fund by $2,692,675 from the prior year.
The increase resulted from differences in timing between project expenditures and encumbrances
and the recognition of corresponding permanent financing. The prior year deficit was partially
eliminated with the scheduled long term bonds debt issuance in 2011.
Community Preservation Fund
At the end of the current year, the Community Preservation Fund had a total restricted fund balance of
$10,845,180.
The fund balance increased in the Community Preservation Fund by $4,842,830.
· Non-property tax items and federal aid was over budget by $690,355 and $1,267,623, respectively
due to unanticipated increases in these revenue sources.
· Home and community services were under budget by $5,077,271 due to the Town purchasing land
with community preservation funds and bond proceeds.
Nonmajor Governmental Funds
The net change in fund balances was an increase of $30,322.
· There was an originally planned use of fund balance of $531,585 to hold the line on property taxes in
2011.
· The $509,718 surplus in departmental income in the Solid Waste Management Fund was a result of
the Town's reduction of the commercial garbage rate which attracted waste not previously handled by
the Town.
-11-
TOWN OF SOUTHOLD
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31,2011
GENERAL FUND BUDGETARY HIGHLIGHTS
The Town appropriated expenditures in the original General Fund Budget in excess of estimated revenues in
the amounts of $1,941,000, inclusive of $27,000 of encumbrances, by designating unreserved fund balance
from the prior year. Actual revenues were less than anticipated by $149,758. Actual expenditures in all
budgetary line items were less than the budgetary appropriation by $2,820,564. Over the course of the year,
the Town Board revises the budget as needed so that expenditures do not exceed appropriations. In all Town
funds, various transfers between appropriations were approved for this purpose. The following are the main
components of the increase in appropriations:
· Sale of property and compensation for loss increased by $996,137 due to a large insurance recovery
received. There was a corresponding increase in appropriations to employee benefits to accrue the
cost of that medical claim to be paid subsequent to year end.
· Public safety increased by $577,802 to pay for the compensation for retirees.
CAPITAL ASSET AND DEBT ADMINISTRATION
Capital Assets
As of December 31, 2011 the primary government had $150,870,904 in net capital assets including land, land
development rights, buildings, improvements, machinery and equipment, and infrastructure. The Town's
component units had $16,945,620 in net capital assets including land, land development rights, buildings,
improvements, machinery and equipment, and infrastructure.
Capital Assets at December 31,
Primary Government Land
Land development rights
Construction in progress
Buildings
improvements other than buildings
Machinery and equipment
Software
Infrastructure
Total Capital Assets
Less: accumulated depreciation
Primary Government - Total Net Capital Assets
2011 2010
6,635,131 $ 5,256,156
107,616,052 100,094,235
680,052 1,337,090
12,770,832 12,759,942
15,701,292 15,410,764
10,763,984 10,661,595
742,498 567,152
75,375,350 73,594,619
230,285,191 219,681,553
79,414,287 75,410,177
$ 150,870,904 $ 144,271,376
Component Units
Land
Construction in progress
Buildings
Improvements other than buildings
Machinery and equipment
Infrastructure
Total Capital Assets
Less: accumulated depreciation
Component Units - Total Net Capital Assets
$ 2,193,353 $ 2,193,353
92,382
14,243,397 14,227,122
2,349,227 2,336,272
3,530,487 3,518,312
2,899,442 2,804,422
25,215,906 25,171,863
8,270,286 7,496,338
$ 16,945,620 $ 17,675,525
-12-
TOWN OF SOUTHOLD
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31, 2011
CAPITAL ASSET AND DEBT ADMINISTRATION (continued)
Capital Assets (continued)
The capital program is a long range financing guide and not a definitive plan. Each appropriation must be
authorized by Town Board resolution before being undertaken. Each may be financed by issuance of general
obligation bonds, which, at times, are preceded by issuance of bond anticipation notes for various periods of
time depending on the probable usefulness of the purpose of expenditure. The following sets forth a summary
of the Town's capital program.
Equipment 2012
General Fund $ 34,000
Highway Fund 525,000
Total Equipment 559,000
Improvements
General Fund 105,500
Total Improvements 105,500
Total Program $ 664.500
Additional information on the Town's capital assets can be found in Note C.3 to the financial statements.
Long-Term Debt
The Town of Southold's bond credit rating from Mood~/s Investors Services was Aa2 as of December 31,2011.
Debt Limit - The Town has the power to contract indebtedness for any Town purpose so long as the principal
amount thereof, subject to certain limited exceptions, shall not exceed seven percent of the average full
valuation of taxable real estate of the Town, and subject to certain enumerated exclusions and deductions
such as water and certain sewer facilities and cash or appropriations for current debt service.
The constitutional method for determining full valuation is calculated by taking the assessed valuation of
taxable real estate as shown upon the latest completed assessment roll and dividing the same by the
equalization rate as determined by the State Board of Equalization and Assessment. The State Legislature is
required to prescribe the manner by which such ratio shall be determined. Average full valuation is
determined by taking the sum of the full valuation of the last completed assessment roll and the four preceding
assessment rolls and dividing such sum by five. Percentage of debt contracting power exhausted at December
31, 2011 was 6.51%.
At December 31, 2011, the Town had approximately $44.4 million in long term general obligation bonds
outstanding, of which $42.5 million was for the primary government. Also outstanding at year-end were bond
anticipation notes in the amount of $2.9 million of which $2.3 million was for the primary government.
Additional information on the Town's debt activity can be found in Note C.4 to the financial statements.
ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES
Property Tax
The Town has adopted a budget for the 2012 fiscal year which factors in inflation and other adjustments to
revenues and expenditures as well as prior year positive and negative fund balances. The 2012 budget
includes an overall increase in real property tax revenues from the prior year of approximately 2.38% for the
general Town governmental activities.
-13-
TOWN OF SOUTHOLD
MANAGEMENT'S DISCUSSION AND ANALYSIS
December 31,2011
ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES (continued)
Property Tax (continued)
In June 2011, New York State enacted Chapter 97, Laws of 2011 Real Property Tax Levy Cap and Mandate
Relief Provisions, which includes a 2% property tax cap for municipalities that affects the Town and its
municipal component units. Beginning in 2012, and lasting through at least June 15, 2016, no local
government is authorized to increase its property lax levy by more than 2% or the rate of inflation (whichever is
less); however the permitted increase will not be tess than 1%. Local governments can exceed the tax levy
limit by a 60% vote of the governing body, or local law. There are permitted exceptions and adjustments. The
Town is currently evaluating the effect of the cap on future year's budgets.
State Aid and Local Assistance
The Town receives financial assistance from New York State and from Suffolk County. During 2011, financial
assistance included state aid consisting of mortgage tax of $974,928, consolidated highway aid of $342,355,
and other state aid of approximately $328,684. State aid per capita was $88,328 and County local government
assistance was $271,087. Additionally, if the State should not adopt its budget in a timely manner,
municipalities and school districts in the State, including the Town, may be affected by a delay in the payment
of state aid. The State is not constitutionally obligated to maintain or continue state aid to the Town. The
Town's 2012 budget included similar amounts for this financial assistance.
CONTACTING THE TOWN'S FINANCIAL MANAGEMENT
This financial report is designed to provide our citizens, taxpayers, customers, and creditors with a general
overview of the Town's finances and to show the Town's accountability for the money it receives. If you have
questions about this report or need additional financial information, contact the Town of Southold, Office of the
Town Comptroller, Southold, New York.
-14-
BASIC FINANCIAL
STATEMENTS
ASSETS
TOWN OF SOUTHOLD
GOVERNMENT-WIDE FINANCIAL STATEMENT
STATEMENT OF NET ASSETS
December 31, 2011
Current Assets:
Cash and investments
Cash - restricted
Accounts receivable
Due from other governments
Due from primary government
State and federal aid receivables
Prepaid charges
Inventory of material and supplies
Total Current Assets
Non-Current Assets:
Deferred charges, net of accumulated amortization
Non-depreciable capital assets
Depreciable capital assets, net of depreciation
Total Non-Current Assets
LIABILITIES
Current Liabilities:
Accounts payable and accrued liabilities
Accrued interest payable
Bond anticipation notes payable
Due to other governments
Due to component units
Unearned revenue
Non-current liabilities due within one year
General obligation bonds payable
Compensated absences
Claims and judgments payable
Estimated liability for landfill closure
and postclosure care costs
Total Current Liabilities
Non-Current Liabilities:
General obligation bonds payable
Due to employees retirement system
Compensated absences
Estimated liability for landfill closure
and postclosure care costs
Other postemployment benefits payable
Total Non-Current Liabilities
NET ASSETS
Investment in capital assets, net of related debt
Restricted:
Unrestricted (Deficit)
Total Assets
Total Liabilities
Total Net Assets
Primary
Governmental Component
Activities Units
$ 25,971,034 $ 2,390.966
10,413,847
1,107.286 45,648
1,727.432
675,461
957,511
851.764 83,700
2.623
41,031,497 31195,775
121,380
114,931,235 2,193,353
35,939,669 14,752,267
150,992,284 16,945,620
192,023,781 20,141,395
1,828,167 257.067
461,610 27,206
2,342,000 650.000
5,814,612 2,327
675,461
9,268,004 675,668
2,480,000 175,000
90,000 52,329
1,296,335
24,540
24,280,729 1,839,597
40,005,000 1,725,000
240,909
7,397.291 161,583
944,566
18,952,909 323,155
67,540,675 2,209,738
91,821,404 4,049,335
112,161,093 13.866,127
10,855,163
(22,813,879) 2.225,933
$100,202,377 $ 16,092,060
See notes to the financial statements.
Function/Program
PRIMARY GOVERNMENT
Government Activities:
General government support
Public safety
Public health
Transportation
Economic assistance and opportunity
Culture and recreation
Home and community services
Interest on debt
TOWN OF SOUTHOLD
GOVERNMENT-WIDE FINANCIAL STATEMENT
STATEMENT OF ACTiVITiES
Year ended December 31,2011
Program Revenues
Operating Capital
Charges for Grants and Grants and
Expenses Services Contributions Contributions
Net Expenses and
Change in Net Assets
Pdmary Component
Government Units
Total Primary Government
$ 9,355,688 $ 233,130 $ 312,921 $ 22,129 $ (8,787,508)
18,122,010 616,978 197,759 (17,307,273)
33,788 10,193 (23,595)
7,964,250 10,410 249,093 587,543 (7,117,204)
1,998,220 199,619 248,286 24,974 (1,525,341)
537,449 222,502 (314,947)
6,815,221 2,632,400 260,400 1,305,153 (2,617,268)
1,409,800 (1,409,800)
$ 46,236,426 $ 3,915,039 $ 1,278,652 $ 1,939,799 $ (39,102,936)
COMPONENT UNITS
General government support
Public health
Transportation
Culture and recreation
Home and community services
Interest on debt
$ 233,147
78,463
3,323,353 $ 2,587,181
848,579
621,174 48,857
83,279
Total Component Units $ 5,187,995 $ 2,636,038 $
$ 70,285
-0- .$ 70,285
(233,147)
(78,463)
(665,887)
(848,579)
(572,317)
(83,279)
$ (2,481,672)
GENERAL REVENUES
Real property taxes $ 29,694,522
Other real property tax items 94,277
Non-property tax items 4,770,088
Interest earnings 130,503
State aid - unrestricted 947,121
Other 1,695,355
Total General Revenues
$ 2,158,270
118
10,199
271,895
37,331,866 2,440,482
Change in Net Assets
(1,771,070) (41,190)
Net Assets at Beginning of Year 101,973,447
16,133,250
Net Assets at End of Year $ 100,202,377 $ 16,092,060
See notes to financial statements.
-16-
TOWN OF SOUTNOLD
BALANCE SHEET
GOVERNMENTAL FUNDS
December 31,2011
ASSETS
Cash and investments
Cash - resthcted
Accounts receivable
Due from other funds
State and federal aid receivable
Due from other governments
Supply inventory
Prepaids
Total Assets
LIABILITIES AND FUND BALANCES
LIABILiTiES
Accounts payable
Judgments and claims
Retained percentages
Bond an6cipation notes payable
Due to other funds
Due to component units
Due to other governments
Deferred revenue
Total Liabilities
FUND BALANCE
Nonspendable
Restricted
Assigned
Unassigned
Total Fund Balance (Deficit)
Total Liabilities and Fund Balance
MAJOR GOVERNMENTAL FUNDS Non-Major
Capital Community Governmental
Highway Projects Preservation Funds
$ 23.606,360 $ 798.148 $ 642.975 $ 923,551 $ 25,971.034
$ 10,413,847 10,413,847
889,156 4,694 213,436 1,107,286
12.476 1.438.917 229.606 1,226,027 2.907,026
456.993 314,115 12,474 173,929 957,511
1,056,937 444.083 1,501.020
2.623 2,623
694.357 79.494 77,913 851,764
$ 26,718,902 $ 2,630,674 $ 885,05~5 $ 10,862,62~4 $ 2,614,85~6 $ 43,712,111
$ 1,061,231 $ 199.781 $ 250.681 $ 17,444 $ 266.593 $ 1.795.730
1,296.335 1,296.335
32.437 32.437
2,342,000 2.342,000
2.890,552 4,000 12,474 2,907,026
675,461 675,461
5,814.612 5,814,612
6.755.979 1.432.373 500 1,079.152 9,268.004
18,494,170 1,636,154 2,638,092 17,444 1,345,745 24,131,605
69~,980 79,494
3,315,049 915,026
4,212,703 (1,753,037)
8,224,732 994,520 (1,753,037)
$ 26,718,90~2 $ 2,630,67,4 $ 885.~..~,055
77.913 854.387
9.983 10.855,163
1,181,215 5,411.290
2.459,666
10,845,180 1,269,111 19,580,506
$ 10,862,624 $ 2.614.856 $ 43.712,111
See notes to the financial statements,
TOWN OF SOUTHOLD
RECONCILIATION OF THE GOVERNMENTAL FUNDS BALANCE SHEET TO THE
STATEMENT OF NET ASSETS
December 31,2011
Total Fund Balances - Governmental Funds
Amounts reported for governmental activities in the
Statement of Net Assets are different because:
Capital assets less accumulated depreciation are
included in the Statement of Net Assets:
Capital assets - non-depreciable
Capital assets - depreciable
Accumulated depreciation
$114,931,235
115,353,956
(79,414,287)
Long-term liabilities applicable to the Town's
governmental activities are not due and payable
in the current period and accordingly are not
reported in the funds. However these liabilities
are included in the Statement of Net Assets:
General obligation bonds payable
Due to employees retirement system
Compensated absences
Estimated liability for landfill closure
and postclosure care costs
Other postemployment benefits payable
$ (42,485,000)
(240,909)
(7,487,291)
(969,106)
(18,952,909)
Revenues in the Statement of Activities that do not provide current financial
resources are not reported as revenues in the funds.
Deferred charges, included in the Statement of Net Assets
Interest payable applicable to the Town's governmental
activities are not due and payable in the current period
and accordingly are not reported in the funds. However
these liabilities are included in the Statement of Net Assets.
Net Assets of Governmental Activities
$ 19,580,506
150,870,904
(70,135,215)
226,412
121,380
(461,610)
$100,202,377
See notes to financial statements.
-18-
TOWNOFSOUTHOLD
STATEMENT OF REVENUES, EXPENDITURES AND CHANGESIN FUND BALANCES
GOVERNMENTALFUNDS
Fortheyearended December31,2011
MAJOR GOVERNMENTAL FUNDS Non-Major
Capital Community Governmental
General Highway Projects Preservation Funds
REVENUES
Real property taxes $ 21.734,453 $4.586,896
Other real property tax items 85.765 7.148
Non-property tax items 885.473
Departmental income 529,774
lntargovernmenta[ charges and local aid 271,087
Use of money and property 270.073 6.583
Licenses and permits 269.551 10.410
Fines and forfeitures 184.388
Sale of property and compensation for los 1.024.171 9,950
Miscellaneous local sources 310.392
Interfund revenues 30,000
State aid 1,133,604 416,217
Federal aid 508,605 240,253
Totals
$ 8.187
42.974
$3,373,173 $ 29.694,522
1,364 94.277
$ 3.570.355 314.260 4.770.088
2.501.551 3.031.325
271.087
29.884 15.522 330.249
168.084 448,045
184.388
358.459 1,392.580
100 9.983 320.475
30,000
149,462 1,742,257
1,267,623 197,389 2,213,870
Total Revenues 27.237,336 5.277.457 51,161 4,867.962 7,089,247 44,523,163
EXPENDITURES
Current:
General government support
Public safety
Public health
Transportation
Economic assistance and opportunity
Culture and recreation
Home and community services
Employee benefits
Capital Outlay
Debt Service:
Principal
Interest
Total Expenditures
Excess (Deficiency) of Revenues
Over Expenditures
Other Financing Sources (Uses)
Debt proceeds
Transfers in
Transfers out
Total Other Financing Sources (Uses)
Net Change in Fund Balance
Fund Balances (Deficit) at Beginning of Y~
Fund Balances (Deficit) at End of Year
5.796.536 6.283 75.439 5.878.258
9.247.050 1,283.580 10.530,630
33,788 33.788
474,404 3,175,948 3.650,352
1.165,355 1,165.355
277,281 277.281
419.977 8.389,229 3.524.760 12.333.966
7,534.913 1,517.515 1.181,638 10.234,066
1.673.943 1,673.943
647.425 85.000 791.500 466.075 1.990.000
152,690 11.657 844.403 202,262 1,211,012
25.749.419 4.796,403 1.673.943 10,025,132 6.733.754 48.978.651
1,487.917 481.054 !1.622.782) (5,157,170) 355.493 (4.455.488)
3,175.000 10.000.000 13.175.000
1.140.457 1.140.457
(686,286) (129.000) . (325.171) (1.140.457)
(686,286) (129,000) 4.315,457 10.000.000 (325.171) 13.175.000
801,631 352,054 2,692.675 4.842,830 30.322 8.719.512
7.423.101 642.466 (4.445.712) 6,002.350 1.238.789 10.860.994
$ 8,224.732 $ 994,520 $ (1.753.037) $ 10,845.180 $1.269.111 $19.580.506
TOWN OF SOUTHOLD
RECONCILIATION OF THE GOVERNMENTAL FUNDS STATEMENT OF REVENUES,
EXPENDITURES AND CHANGES IN FUND BALANCES TO THE STATEMENT OF ACTIVITIES
For the year ended December 31,2011
Net Change in Fund Balance
Governmental funds report capital outlays as expenditures. However, in
the Statement of Activities the cost of those assets is allocated over their
estimated useful lives and reported as depreciation expense. The amount
by which capital outlay exceeds depreciation in the current period is:
Capital outlay
Depreciation expense
Loss on dispositions
10,994,209
(4,382,717)
(11,964)
Revenues in the Statement of Activities that do not provide current financial
resources are not reported as revenues in the funds.
Some expenses reported in the Statement of Activities do not require
the use of current financial resources and therefore, are not reported as
expenditures in governmental funds:
Prepaid charges
Deferred charges
The issuance of long-term debt and increase in obligations under capital
leases provides current financial resources to governmental funds, while the
repayment of the principal of long term debt and capital leases consumes
the current financial resources of governmental funds.
Neither transaction has any effect on net assets.
Bonds issued
Repayment of bond principal
Due to employees retirement system
Compensated absences
Estimated liability for landfill closure
and postclosure care costs
Other postemployment benefits payable
Accrued interest payable
Change in Net Assets of Governmental Activities
$ 8,719,512
6,599,528
(27,807)
(555,673)
(31,110)
(13,175,000)
1,990,000
71,928
57,080
24,230
(5,244,970)
(198,788)
$ (1,771,070)
See notes to financial statements.
-20-
TOWN OF SOUTHOLD
STATEMENT OF FIDUCIARY NET ASSETS
December 31,2011
ASSETS
Cash and investments
Other receivables
LIABILITIES
Due to other governments
Other liabilities
Deposits heed
Town
Fishers Island
Ferry District
$ 15,037,334 $
583
Total Assets $ 15,037,917 $
Totals
Total Liabilities
54 $15,037,388
583
54 $15,037,971
$ 14,605,901
232,531
199,485
$ 15,037,917 $
$14,605,901
54 232,585
199,485
54 $15,037,971
See notes to financial statements.
-21-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31~ 2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Town of Southold (the "Town"), which was established in 1640, is governed by Town Law and other
general laws of the State of New York and various local laws. The Town Board is the legislative body
responsible for overall operations. The Town Board consists of the Supervisor who is elected for a term
of four years and five council members who are elected for terms of four years. The Town Board appoints
the Town Attorney, Comptroller and the Commissioner of Public Works whose terms are fixed by Town
Law. The Town Clerk, Receiver of Taxes, Superintendent of Highways, Justices and Town Trustees are
all elected and serve for four years, respectively. The Town provides a full range of municipal services,
including public safety, transportation, home and community services, public works and road
maintenance, recreation and parks, and general and administrative services.
The financial statements of the Town of Southold have been prepared in conformity with accounting
principles generally accepted in the United States of America (GAAP) as applied to governmental units.
The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for
establishing governmental accounting and financial reporting principles.
The more significant of the government's accodnting policies are described below.
1. REPORTING ENTITY
The financial reporting entity consists of: la) the primary government, which is the Town of
Southold; lb) organizations for which the primary government is financially accountable; and lc)
other organizations for which the nature and significance of their relationship with the primary
government are such that exclusion would cause the reporting entity's financial statements to be
misleading or incomplete as set forth in GASB Statement No. 14 as amended by GASB Statement
No. 39.
The decision to include a potential component unit in the Town of Southold reporting entity is based
on several criteria set forth in GASB Statement No. 14 as amended by GASB Statement No. 39
including legal standing, dependency and financial accountability. Based on the application of
these criteria, the following is a summary of certain entities considered in determining the Town of
Southold's reporting entity.
Certain special districts of the Town of Southold are separate legal entities and have separately
elected boards of commissioners. These special districts provide sanitation, ferry, and park
services to residents and businesses within the districts. Special districts cannot issue bonded
debt without the approval and the backing of the full faith and credit of the Town. Budgets and tax
rates are approved by the Town. Tax levies of the special districts are collected by the Town
Receiver of Taxes. As a result of this fiscal dependency, the Town is financially accountable for
these special districts. Accordingly, these special districts have been determined to be component
units of the Town and are presented discretely in a separate column in the combined financial
statements to emphasize that they are legally separate from the primary government. Condensed
financial statements along with the addresses of the administrative office, for these component units
are presented in Note E.
2. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS
The Town's basic financial statements include both government-wide (reporting the Town as a
whole) and fund financial statements (reporting the Town's major funds).
Government-wide Financial Statements
The government-wide financial statements (i.e. the statement of net assets and the statement of
activities) report information on all of the non-fiduciary activities of the Town as a whole with
separate columns for the primary governmental activities as well as the discretely presented
component units. For the most part, the effect of interfund activity has been eliminated from the
government-wide financial statements, except for interfund services provided and used.
-22-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (continued)
Government-wide Financial Statements (continued)
The government-wide Statement of Activities demonstrates the degree to which the direct
expenses of a given function are offset by program revenue. Direct expenses are those that are
clearly identifiable with a specific function. Program revenues include (1) charges to customers
or applicants who purchase, use, or directly benefit from goods, services, or privileges provided
by a given function, (2) grants and contributions that are restricted to meeting the operation and
capital requirements of a particular function, (3) interest earned on grants or capital projects that
is required to be used to support a particular program or project. Taxes and other items not
properly included among program revenues are reported as general revenues. The Town does
not allocate indirect expenses to specific functions in the Statement of Activities.
Fund Financial Statements
Separate financial statements are provided for governmental funds and fiduciary funds, even
though the fiduciary funds are excluded from the government-wide financial statements. Major
individual governmental funds are reported as separate columns in the fund financial statements.
The accounts of the Town are organized on the basis of funds, each of which is considered a
separate accounting entity. The operations of each fund are accounted for with a separate set of
self-balancing accounts that comprise its assets, liabilities, fund balances, revenues, and
expenditures, which are segregated for the purpose of carrying on specific activities or attaining
certain objectives in accordance with special regulations, restTictions or limitations. The various
funds are presented by type in the fund financial statements. Certain funds of the Town are utilized
to account for resources derived from and/or expenditures applicable to an area less than the entire
Town. The focus of the governmental funds financial statements is on the major funds. Accordingly,
the Town maintains the following fund types:
Governmental Funds - Governmental funds are those through which most governmental
functions are financed. The acquisition, use and balances of expendable financial resources and
the related liabilities are accounted for through governmental funds. The measurement focus of
the governmental funds is upon determination of financial position and changes in financial
position. Governmental funds are further classified as major and nonmajor funds.
The Town reports the following major governmental funds:
General Fund - is the principal operating fund of the Town. This fund is used to account for all
financial resources except those required to be accounted for in other funds.
Highway Fund - used to account for the maintenance and operation of highways.
Capital Projects Fund - used to account for financial resources to be used for the acquisition
or construction of major capital facilities (other than those financed by special assessment
funds and trust funds).
Community Preservation Fund - is used to account for financial resources for the purchase of
land and land development rights.
-23-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31, 2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2. GOVERNMENT-WIDE AND FUND FINANCIAL STATEMENTS (continued)
Fund Financial Statements (continued)
Additionally, the Town reports the following non-major funds:
Special Revenue Funds - are used to account for the proceeds of specific revenue sources (other
than major capital projects) that are legally restricted to expenditures for specified purposes.
Special Revenue Funds include the following:
General Fund Part Town - is used to account for revenues and expenditures for certain
services provided by the area of the Town located outside the Village of Greenport.
Special Grant Fund - is used to account for Federal Aid for the Community Development
Block Grant Program.
Special District Funds - are used to account for taxes or other revenues, which are raised
or received to provide special services to areas that encompass less than the whole town.
Fiduciary Funds - Fiduciary Funds are used to account for assets held by the Town in a trustee
or custodial capacity.
Aqency Fund - is used to account for resources held as an agent for parties outside the
government. Agency fund resources cannot be held for other funds.
Discretely Presented Component Units
Certain special districts that have separately elected boards provide transportation, park, mosquito
control, and sanitation services to residents and businesses within these districts, and follow
government fund accounting principles. These districts, which are accounted for as discretely
presented component units, are as follows:
Orient Mosquito District, established in 1916
Cutchogue-New Suffolk Park District, established in 1953
Southold Park District, established in 1907
The Fishers Island Ferry District, established in 1947
Fishers Island Waste Management District, established in 1952
Orient-East Marion Park District, established in 1969
Mattituck Park District, established in 1941
MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT
PRESENTATION
Measurement focus refers to what is being measured whereas the basis of accounting refers to
when revenues and expenditures are recognized in the accounts and reported in the financial
statements. Basis of accounting relates to the timing of the measurement made, regardless of the
measurement focus applied.
The government-wide statements are reported using the economic resources measurement focus
and the accrual basis of accounting. Under the accrual basis of accounting, revenues are
recognized when earned and expenses are recorded when the liability is incurred, regardless of the
timing of related cash flows. Property taxes are recognized as revenues in the year for which they
are levied. Grants and similar items are recognized as revenue as soon as all eligibility
requirements imposed by the provided have been met.
-24-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31, 2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
3. MEASUREMENT FOCUS, BASIS OF ACCOUNTING, AND FINANCIAL STATEMENT
PRESENTATION (continued)
Governmental fund financial statements are reported using the current financial resources
measurement focus and the modified accrual basis of accounting. Revenues are recognized as
soon as they are both measureable and available. Revenues are considered available when they
are collectible within the current period or soon enough thereafter to pay liabilities of the current
period. For this purpose, the Town generally considers revenues to be available if they are collected
within 60 days after the year end. In certain circumstances this application of the Town's normal
availability period for a given revenue source might distort revenue trends from one year to the next.
In such unusual circumstances, revenues may be considered available if received beyond 60 days
however to the extent the revenue remains uncollected after one year the Town would classify the
fund balance as nonspendable.
Revenues susceptible to accrual include Suffolk County local assistance at year end on behalf of
the Town, franchise fees, and charges for services, intergovernmental revenues and operating
transfers. Permits, fees, and other similar revenues are not susceptible to accrual because
generally they are not measurable until they are received in cash. In those instances where
expenditures are the prime factor in determining eligibility for state and federal grants, revenues are
recognized when the expenditure is incurred. In the Capital Projects Fund, long-term debt is
recognized as revenue upon receipt of the proceeds. Expenditures are recorded on the accrual
basis except that (a) expenditures for prepaid expenses are recognized when incurred; (b) principal
and interest on indebtedness are recognized as expenditures when due; (c) compensated
absences, such as vacation and sick leave, which vest or accumulate, are charged as expenditures
when paid.
Because governmental fund statements are presented using a measurement focus and a basis of
accounting different from that used in the government-wide statements governmental column,
reconciliation is presented that briefly explains the adjustment necessary to reconcile ending net
assets and the change in net assets.
4. ASSETS, LIABILITIES AND FUND EQUITY
CASH AND CASH EQUIVALENTS
Cash consists of funds deposited in demand accounts, time deposit accounts and certificates of
deposit with maturities of less than three months.
State statutes govern the Town's investment policies. The Town's investments are governed by a
formal investment policy. The Town's monies must be deposited in FDIC-insured commercial
banks or trust companies located within the state. The Town is authorized to use demand
accounts and certificates of deposit. Permissible investments include obligations of the U.S.
Treasury, U.S. Agencies and investments made by the Cooperative Liquid Asset Security
System (CLASS).
Collateral is required for demand deposits and time deposit accounts at 100% of all deposits not
covered by federal deposit insurance. Obligations that may be pledged as cellateral include
obligations of the United States and its agencies and obligations of the State and its municipalities
and school districts. The Town's collateral agreements are based on the Town's available balance.
RESTRICTED ASSETS
Certain assets of the Community Preservation Fund are classified as restricted assets because
their use is restricted by contractual agreements and regulations.
-25-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4. ASSETS, LIABILITIES AND FUND EQUITY (continued)
Interfund transactions, exclusive of interfund services provided and used, have been eliminated
from the government-wide financial statements. In the funds statements interfund transactions
include:
a) Interfund Revenues
Interfund revenues, which are quasi-external transactions, in the General Fund represent
amounts charged for services or facilities provided by the General Fund. The amounts paid
by the fund receiving the benefit of the service or facilities are reflected as an expenditure of
that fund.
b) Transfers
Transfers represent payments to the General Fund and Capital Projects Funds from the other
funds for their appropriate share of the General Fund or capital project costs.
INVENTORY AND PREPAID ITEMS
Inventory in the general and special revenue funds is valued at cost. Inventory in these funds is
accounted for under the consumption method.
Certain payments to vendom reflect costs applicable to future accounting periods and are reported
as prepaid items in both the government-wide and fund financial statements. Prepaids in the
General and Special Revenue Funds represent retirement benefits that will benefit a future period.
In governmental funds, amounts reported as inventories and prepaid items are equally offset by
nonspendable fund balance amounts, indicating that they do not constitute "available spendable
resources~ even though they are a component of net current assets.
CAPITAL ASSETS
Capital assets purchased or acquired with an original cost of $5,000 or more are reported at
historical cost or estimated historical cost. Donated assets are reported at estimated fair market
value as of the date of donation. Additions, improvements and other capital outlays that
significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs
and maintenance are expensed as incurred. Depreciation and amodizafion on all assets is
provided on the straight-line basis over the following estimated useful lives:
Buildings
Improvements and other
Machinery and equipment
Software
Infrastructure
10-40 years
20 years
5-10 years
5-10 years
20-30 years
Infrastructure assets, consisting of certain improvements other than buildings including roads,
curbs, sidewalks, bridges, and street lighting are capitalized along with other capital assets.
Intangible assets lack physical substance, are nonfinancial in nature, and have an estimated useful
life extending beyond a single reporting period. The term depreciation, as used in these footnotes,
includes amortization of intangible assets.
In the fund financial statements, capital assets are recorded as capital outlay expenditures in the
governmental fund upon acquisition.
-26-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4. ASSETS, LIABILITIES AND FUND EQUITY (continued)
DEFERRED REVENUE/UNEARNED REVENUE
Deferred revenue/unearned income are those where asset recognition criteria have been met, but
which revenue recognition criteria have not been met. Such amounts include collections in
advance, unearned income and amounts that have been deemed to be "measurable" but not
"available" to finance current expenses.
Discounts and expenses related to the issuance of long-term debt and the loss on the early
retirement of refunded debt are amortized on a straight-line basis over the life of the issue, and are
presented net of accumulated amortization, in the government-wide financial statements. Bond
issuance costs that are immaterial are charged as operating expenses in the fund servicing the debt
when incurred.
In the fund financial statements bond issuance costs are recognized, during the current period, as
debt service expenditures in the fund servicing the debt.
LONG~ERM OBLIGATIONS
In the government-wide financial statements, liabilities for long-term obligations consisting of
general obligation bonds, compensated absences, claims and judgments, liability for landfill closure
and postclosure costs, other postemployment benefits, and due to employees retirement system
are recognized in the statement of net assets. Bond premiums or discounts, as well as issuance
costs, are deferred and amortized on a straight-line basis over the life of the bonds. Bond premiums
or discounts, as well as issuance costs, are deferred and amortized on a straight-line basis over the
life of the bonds. Bonds payable are reported net of applicable bond premium or discount. Bend
issuance costs that are immaterial are charged as a General Fund operating expense.
In the fund financial statements, governmental funds recognized bond premiums and discounts, as
well as bond issuance costs, during the current period. The face amount of the debt issued is
reported as other financing sources. Premiums received on debt issuances are reported as other
financing sources while discounts on debt issuances are reported as other financing uses. Issuance
costs, whether or not withheld from actual debt proceeds received, are reported as debt service
expenditures.
NET ASSETS AND FUND EQUFTY CLASSIFICATIONS
In the government-wide statements, equity is classified as net assets and displayed in three
components:
a)
Invested in capital assets, net of related debt--Consists of capital assets including
restricted capital assets, net of accumulated depreciation and reduced by the outstanding
balances of any bonds, notes, or other borrowings that are attributable to the acquisition,
construction, or improvement of those assets.
b)
Restricted net assets-Consists of net assets with constraints placed on the use either by
(1) external groups such as creditors, grantors, contributors, or laws or regulations of other
governments; or (2) law through constitutional provisions or enabling legislation.
c)
Unrestricted net assets--All other net assets that do not meet the definition of "restricted"
or "invested in capital assets, net of related debt."
-27-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 3'1, 20'1 '1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
4. ASSETS, LIABILITIES AND FUND EQUITY (continued)
NET ASSETS AND FUND EQUITY CLASSIFICATIONS (continued)
Governmental Accounting Standards Board Statement No. 54, Fund Balance Reporting and
Governmental Fund Definitions (GASB 54) has been implemented. GASB 54 changed the
terminology and classification of fund balance to reflect spending constraints on resources
rather than availability for appropriation. The fund balance section of the governmental funds
balances sheets have been modified accordingly. Not all of the Town's funds will necessarily
have all of the components of fund balance available to that fund. The implementation of these
new components is intended to increase clarity and help serve the needs of the financial
statement users.
In the fund financial statements, governmental funds report aggregate amounts for five
classification of fund balances based on the constraints imposed on the use of these resources;
they are (1) nonspendable, (2) restricted, (3) committed, (4) assigned, or (5) unassigned
1)
Nonspendable fund balance includes amounts that cannot be spent because they are
either (a) not in spendable form (i.e. prepaid items or inventories), or (b) will not convert to
cash within the current period (i.e. long-term receivables and financial assets held for
resale), or (c) legally or contractually required to be maintained intact (i.e. the principal of a
permanent fund).
The spendable portion of the fund balance comprises the remaining four classifications:
restricted, committed, assigned, and unassigned.
2)
Restricted fund balance reflects the constraints imposed on resources either (a) externally
by creditors, grantors, contributors, or laws or regulation of other governments; or (b)
imposed by law through constitutional provisions or enabling legislation.
3)
Committed fund balance reflects amounts that can only be used for specific purposes by a
government using its highest and most binding level of decision making authority. The
Town's highest decision making authority is the Town Board, who by adoption of a Town
ordinance prior to year end, can commit fund balance. Those committed amounts cannot
be used for any other purpose unless the Town Board removes or changes the specified
use by taking the same type of action imposing the commitment.
4)
5)
Assigned fund balance reflects the amounts constrained by the Town's "intent" to be used
for specific purposes, but are neither restricted nor committed. The Town Board has the
authority to assign amounts to be used for specific purposes. Assigned fund balances
include all remaining amounts (except negative balances) that are reported in
governmental funds, other than the General Fund, that are not classified as nonspendable
and are neither restricted nor committed.
Unassigned fund balance. This fund balance is the residual classification for the General
Fund. It is also used to report negative fund balances in other governmental funds.
When both restricted and unrestricted resources are available for use, it is the Town's default
policy to use restricted resources first, and then unrestricted resources - committed, assigned
and unassigned - in order as needed.
The Town has, by resolution, adopted a fund balance policy that states the Town must maintain
a minimum unassigned fund balance in the General Fund equal to 10% of General Fund
expenditures. In the event that the balance drops below the established minimum level, the
Town's Board will develop a plan to replenish the fund balance to the established minimum level
within the current or ensuing fiscal year.
-28-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
5. REVENUES AND EXPENDITURES
REAL PROPERTY TAXASSESSMENT AND COLLECTION PROCEDURES
In Suffolk County, the assessment and lien of real property for taxation is done by the County
Department of Assessment. Real property taxes become a lien on December I for both school and
general taxes. The Town's assessment rolls are used for the levy of real property taxes by the
Town and the School Districts, as well as by the County and by Special Districts of the County and
the Town.
The Town of Southold Receiver of Taxes collects all real property taxes for the Town, Suffolk
County, Town Special Districts and School Districts. These taxes are levied on December 1, and
are due in two installments, 50% on December 1 and 50% on May 10, payable without penalty to
January 10 and May 31, respectively. Penalties are imposed thereafter at the rate of one-twelfth of
the rate of interest determined by the State Commissioner of Taxation and Finance, after which
taxes are payable to the County Treasurer. The Town retains the total amount of Town, Highway
and Town Special Districts levies from the amount collected, and forwards the balance collected to
the County which assumes collection responsibility. The Town and Town's Special Districts
therefore realize annually the 100% collection of real property taxes.
OTHER POSTEMPLOYMENT BENEFITS
In addition to providing pension benefits, the Town provides health insurance coverage and survivor
benefits for retired employees and their survivors. Substantially all of the Town's employees may
become eligible for these benefits if they reach normal retirement age while working for the Town.
Health care benefits in accordance with New York State Health Insurance Rules and Regulations
(administered by the New York State Department of Civil Service), are provided through the New
York State Empire Plan (the "Empire Plan") whose premiums are based on the benefits paid
throughout the State during the year or under the Town of Southold's self insurance plan which is
fudher described in Note D.
The Town recognizes the cost of providing benefits by recording its share of insurance premiums
as an expenditure in the year paid. The Town's union contracts and ordinances require that it
provide its eligible enrollees with Empire Plan benefit coverage, or if another provider is utilized, the
equivalent coverage. Under the provisions of the Empire Plan, premiums are adjusted on a
prospective basis for any losses experience by the Empire Plan. The Town has the option to
terminate its participation in the Empire Plan at any time without liability for its respective share of
any previously incurred loss. The liability for postemployment benefits payable is recorded as a
non-current liability in the government-wide statements. The current year increase in the liability is
based on the most recent actuarial valuation in accordance with parameters of GASB Statement
No. 45.
COMPENSATED ABSENCES
The liability for vested or accumulated vacation or sick leave (compensated absences) is
recorded as current and non-current obligations in the government-wide statements. The
current portion of this debt is estimated based on historical trends and current known facts.
Compensated absence liabilities and expenses are reported in governmental funds only if they
have matured, for example, as a result of employee resignations, terminations, and retirements.
The amount that is expected to be liquidated with expendable available financial resources is
reported as expenditures and a liability in the funds statement in the respective fund that will pay the
liability.
-29-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31, 2011
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
5. REVENUES AND EXPENDITURES (continued)
ENCUMBRANCES
Encumbrance accounting, under which purchase orders, contracts and other commitments for the
expenditures of monies are recorded for budgetary control purposes, is employed in the
governmental funds. Encumbrances are reported as restrictions, commitments, or assignments of
fund balances since they do not constitute expenditures or liabilities. Expenditures for such
commitments are recorded in the period in which the liability is incurred.
6. USE OF ESTIMATES
Management uses estimates and assumptions in preparing financial statements. Those estimates
and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities, and the reported revenues and expenses. Actual results could differ from
those estimates.
7. NEW ACCOUNTING PRINCIPLES
The Town has adopted all of the current Statements of the Accounting Standards Board (GASB)
that are applicable. During the year ended December 31, 2011, the Town adopted GASB
Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions.
8. SUBSEQUENT EVENTS
Management has evaluated subsequent events for disclosure and/or recognition in the financial
statements through the date of the financial statements.
STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY
1. BUDGETARY INFORMATION
Budgets are adopted annually on a basis consistent with generally accepted accounting
principles. Appropriations authorized for the current year are increased by the amount of
encumbrances carried forward from the prior year.
Budgets for the General and Special Revenue Funds exclusive of the Special Grant Fund, are
legally adopted for each year. The budgets are adopted on a basis of accounting consistent with
GAAP, except that appropriations authorized for the current year are increased by the amount of
encumbrances carried forward from the prior years. In the event that actual revenues received
exceed budgeted amounts, additional budgetary appropriations are made. The Capital Projects
and Special Grant funds are budgeted on a project or grant basis.
The Town follows the procedures enumerated below in establishing the budgetary data reflected in
the financial statements:
a)
No later than October 1, the Supervisor submits a tentative budget to the Town Board for
the fiscal year commencing the following fiscal year. The tentative budget includes the
proposed means of financing for all funds.
b)
After public hearings are conducted to obtain taxpayer comments, no later than November
20, the Town Board adopts the budget.
c)
The Town Board must approve all modifications of the budget. However, the Supervisor
is authorized to transfer certain budgeted amounts within departments.
-30-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31, 2011
STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (continued)
1. BUDGETARY INFORMATION (continued)
d) In June 2011, New York State enacted Chapter 97, Laws of 2011 Real Property Tax Levy
Cap and Mandate Relief Provisions, which includes a 2% property tax cap for
municiparities. Beginning in 2012 and lasting through at least June 15, 2016, no local
government is authorized to increase its property tax levy by more than 2% or the rate of
inflation (whichever is less); however local governments can exceed the tax levy limit by a
60% vote of the governing body and annually adopting a local law. The Town did not
exceed the cap in 2012.
FUND EQUITY
FUND BALANCE
In order to comply with the Governmental Accounting Standards Board's (GASB) Statement No 54,
Fund Balance Repoding and Governmental Fund Type Definitions, the fund balance section of the
balance sheets of the governmental funds has been modified. The change has been made in order
for the Town's new fund balance components to focus on "the extent to which the government is
bound to honor constraints on the specific purposes for which amounts in the fund can be spent"
(GASB 54 paragraph 54). Previously, the fund balance section focused on whether these recourses
were available for appropriation. It also distinguished the unreserved fund balance from the
reserved fund balance. In order to show compliance with GASB 54 however, the components of the
new fund balance incrude the following items, as needed: 1) nonspendable, 2) restricted, 3)
committed, 4) assigned, or 5) unassigned.
The following table provides the detail regarding fund balance categories and classifications for the
governmental funds which show components of nonspendable fund balances, as well as the
purposes for restricted, and assigned fund balance. The unassigned fund balance is also shown.
Fund Balances:
Nonspendable:
Inventory
Prepaid items
Total Nonspendable
Restricted for:
Grantors and donor restrictions
Home and community services
Other reserves
Total Restricted
Capital Community Other
General Highway Projects Presewation Governmental
Fund Fund Fund Fund Funds Total
$ 2,623 $ 2,623
694,357 $ 79,494 $ 77,913 851,764
696,980 79,494 $ -0- $ -0- 77,913 854,387
9,983 9,983
10,845,180 10,845,180
-0- -0- -C~ 10,845,180 9,983 10,855,163
1,753,178 290,000 440,484 2,483,662
62,811 70,818 133,629
554,208 740,731 1,294,939
1,499,060 1,499,060
Assigned to:
Subsequent year's budget
Purchases on order or contractual obligati¢
Special revenue funds
Judgments and claims
Total Assigned
3,315,049 915,026 -0- -0- 1,181,215 5,411,290
Unassigned, repoded in
General Fund
Capital Prejecls
4,212,703 4,212,703
(1,753,037) (1,753,037)
Total Unrestricted 4,212,703 *0- (1,753,037) ~0~ -0- 2,459,666
Total Fund Balances $ 8,224,732 $ 994,520 $ (1,753,037) $ 10,845,180 $ 1,269,111 $ 19,580,506
-31-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31, 2011
STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY (continued)
2. FUND EQUITY (continued)
DEFICIT FUND EQUITY
The Capital Projects Fund deficit of $1,753,037 at December 31, 2011 resulted from differences in
timing between project expenditures and encumbrances and the recognition of corresponding
permanent financing sources. This deficit will be eliminated as short-term debt is redeemed or
converted to permanent financing.
C. DETAILED NOTES ON ALL FUNDS
1. CASH AND INVESTMENTS
Custodial Credit Risk - Deposits/Investments - Custodial credit risk for deposits exists when, in
the event of the failure of a depository financial institution, a government may be unable to
recover deposits, or recover collateral securities that are in possession of an outside agency.
Custodial credit risk for investments exists when, in the event of the failure of the counterpady, a
government will not be able to recover the value of its investments or collateral securities that
are in possession of an outside party.
CLASS is a cooperative investment plan consisting of U.S. Treasury Obligations and repurchase
agreements relating to treasury obligations. Investments are stated at cost, which approximates
market value. CLASS was established as a cooperative investment arrangement organized under
the CLASS Municipal Cooperation Agreement made pursuant to New York General Municipal Law,
Article 3A and 5-G.
Collateral is required for demand deposits and certificates of deposit not covered by federal
depository insurance. Obligations that may be pledged as collateral are obligations of the United
States and its agencies and obligations of the state and its municipalities and school districts.
Credit Risk - State law and Town law limit investments to those authorized by State statutes. The
Town has a written investment policy.
Interest-Rate Risk - Interest-rate risk arises because potential purchasers of debt securities will not
agree to pay face value for those securities if interest rates substantially increase, thereby affording
potential purchasers more favorable rates on essentially equivalent securities. Accordingly, such
investments would have to be held to maturity to avoid a potential loss.
Concentration of Credit Risk - Credit risk can arise as a result of failure to adequately diversify
investments. Concentration risk disclosure is required for positions of 5 percent or more in securities
of a single issuer.
Governmental Accounting Standards Board Statement No. 40 directs that deposits be disclosed
as exposed to custodial credit risk if they are not covered by depository insurance, and the
deposits are either:
· Uncollateralized
· Collateralized with securities held by the pledging financial institution, or
· Collateralized with securities held by the pledging financial institution's trust department or
agent but not in the Town's name
At December 31, 2011 the Town's cash book balance was approximately $51,422,217. This
amount is inclusive of Fiduciary fund deposits of $15,037,334 but exclusive of petty cash of $300.
The available bank balance was $51,679,827. Of the bank balance, $6,074,033 was covered by
Federal deposit insurance, and $58,826,717 was covered by collateral held by the Town's agent, a
third-party financial institution, in the Town's name. The Town's $57,936 CLASS investment
consists of U.S Treasury Obligations and repurchase agreements relating to Treasury obligations
and is not subject to risk categorization.
-32-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
C. DETAILED NOTES ON ALL FUNDS (continued)
1. CASH AND INVESTMENTS (continued)
As of December 31,2011, the Town did not have any investments subject to credit risk, interest-
rate risk or concentration of credit risk.
The cash in the Community Preservation Fund is classified as restricted cash because its use is
restricted by contractual agreements and regulations.
2. INTERFUND RECEIVABLES, PAYABLES AND TRANSFERS
Interfund receivable and payable balances for the primary government at December 31, 2011
are expected to be paid currently. These balances represent various temporary loans,
recharges, and reimbursements between funds and are stated as follows:
Major Governmental Funds:
General Fund - Town wide
Highway Fund
Capital Projects Fund
Non-Major Governmental Funds:
General Fund - Part Town
Special Grant
East-West Fire District
Southold Wastewater District
Fishers Island Sewer District
Solid Waste Management District
Amount Amount
Receivable Payable
$ 12,476 $ 2,890,552
1,438,917 4,000
229,606 12,474
224,182
12,533
223,570
30,501
6,300
728,941
Total $ 2.907.026
Interfund transfer balances for the primary government at December 31, 2011 represent primarily
the payment of capital, and debt service expenditures and are stated as follows:
Transfers Transfers
In Out
Major Governmental Funds:
General Fund - Town wide
Highway Fund
Capital Projects Fund
Non-Major Governmental Funds:
Southold Wastewater District
Solid Waste Management District
$ 1,140,457
Total $ 1.140~457 $
$ 686,286
129,000
169,407
155,764
1.140~457
-33-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
DETAILED NOTES ON ALL FUNDS (continued)
3. CAPITAL ASSETS
Capital asset activity for the year ended December 31,2011 are as follows:
Primary qovernment
Capital assets not being depreciated
Land
Land development rights
Construction in progress
Total capital assets not being depreciated
Depreciable capital assets
Buildings
Improvements other than buildings
Machinery and equipment
Software
Infrastructure
Total depreciable capital assets
Less accumulated depreciation
Buildings
Improvements other than buildings
Machinery and equipment
Software
Infrastructure
Total accumulated depreciation
Total net depreciable capital assets
Total net capital assets
Balance
1/1/11 Additions
Subtractions
Balance
12/31/11
5,256,156 $ 1,378,975
100,094,235 7,521,817
1,337,090 418,786
$ 1,075,824
$ 6,635,131
107,616,052
660,052
1061687,481 9,319,578 1,075,824 114,931,235
12,759,942 10,890
15,410,764 290,528
10,661,595 492,960
567,152 175,346
73,594,619 1,780,731
390,571
12,770,832
15,701,292
10,763,984
742,498
75,375,350
112,994,072 2,750,455 390,571 115,353,956
3,460,195 351,156
4,715,002 591,287
7,879,094 661,958
535,884 43,645
58,820,002 2,734,671
378,607
3,811,351
5,306,289
8,162,445
579,529
61,554,673
$ 75,410,177 $ 4,382,717$ 378,607 $ 79,414,287
35,939,669
$ 150,870,904
Depreciation expense was charged to governmental functions as follows:
General government support
Public safety
Transportation
Economic assistance and opportunity
Culture and recreation
Home and community services
$ 296,951
255,287
3,139,954
13,676
93,063
583,766
$ 4,382,717
The Town evaluates prominent events or changes in circumstances affecting capital assets to determine
whether impairment of a capital asset has occurred. The Town's policy is to record an impairment loss in
the period when the Town determines that the carrying amount of the asset wilt not be recoverable. At
December 31,2011, the Town has not recorded any such impairment losses.
-34-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
DETAILED NOTES ON ALL FUNDS (continued)
3. CAPITAL ASSETS (continued)
Discretely presented component units
Capital assets not being depreciated
Land
Construction in progress
Total capital assets not being depreciated
Depreciable capital assets
Buildings
Improvements other than buildings
Machinery and equipment
Infrastructum
Total depreciable capital assets
Less accureulated depreciation
Buildings
Improvements other than buildings
Machinery and equipment
Infrastructure
Total accumulated depreciation
Total net depreciable capital assets
Total net capital assets
Balance Balance
1/1/11 Additions Subtractions 12/31/11
$ 2,193,353 $ 2,193,353
92,382 $ 92,382
2,285,735 $ -0- 92,382 2,193,353
14,227,122 16,275 14,243,397
2,336,272 12,955 2,349,227
3,518,312 12,175 3,530,487
2,604,422 95,020 2,899,442
22,886,128 136,425 -0- 23,022,553
2,707,934 342,462 3,050,396
268,934 201,943 470,877
2,785,596 129,089 2,914,685
1,733,874 100,454 1,834,328
$ 7,496,338 $ 773,948 $ -0- 8,270,286
4. INDEBTEDNESS
14,752,267
$ 16,945,620
SHORT TERM DEBT
Bond Anticipation Notes (BANs) - Bond anticipation notes (BANs) are used as a temporary
means of financing capital expenditures in the Capital Projects Fund. State law requires that BANs
issued for capital purposes be converted to long-term obligations within five years after the original
issue date. The notes or renewal thereof may not extend more than two years beyond the original
date of issue unless a portion is redeemed within two years and within each 12 month period
thereafter. Liabilities for BANs are generally accounted for in the Capital Projects Fund. BANs are
expected to be paid from the proceeds of future bond issues after renewal of these notes. These
BANs bear interest at various rates from .74% to .89% and are due at various dates through 2012.
Proceeds of notes which have been refinanced by the issuance of serial bonds subsequent to the
end of the year but prior to dating of this financial statement are reported as a financing source in
the appropriate fund.
These notes are summarized as follows:
Interest
Description Amount Rate
Various Purposes $ 1,135,000
Various Purposes 900,000
Various Purposes 307,000
Fishers Island Ferry Distrct 650,000
Total ~
-35-
.74%
.85%
.89%
.85%
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
DETAILED NOTES ON ALL FUNDS (continued)
4. INDEBTEDNESS (continued)
SHORT TERM DEBT (continued)
A summary of changes in short term BANs for the year ended December 31,2011 is as follows:
Balance Balance
1/1/11 Increases Reductions 12/31/11
Primary Government $ 5,418,000 $ 1,330,000 $ 4,406,000 $ 2,342,000
Component Units (Unaudited) 800,000 150,000 650,000
$ 6.218.00~00 $ 1,330.000 $ 4,556.000 ~
LONG TERM DEBT
General Obligation Bonds - The Town borrows money in order to acquire land, equipment or
construct buildings and improvements. This enables the cost of these capital assets to be borne by
the present and future taxpayers receiving the benefit of the capital assets.
These long-term liabilities are backed by the full faith and credit of the Town, including bonds of the
Town Special Districts which are payable for tax revenues of the areas benefits. Interest rates of
these bonds vary from 2.00% to 5.00% and have maturity dates in 2012 through 2030.
Future principal and interest payments to maturity for both the primary government
component units are as follows:
Year Endin~ Principal Interest Totals
2012 $ 2,655,000 $ 1,665,975 $ 4,320,975
2013 2,545,000 1,532,946 4,077,946
2014 2,575,000 1,452,968 4,027,968
2015 2,600,000 1,369,587 3,969,587
2016 2,560,000 1,284,704 3,844,704
2017-2021 12,070,000 5,049,068 17,119,068
2022-2026 10,755,000 2,927,269 13,682,269
2027-2030 8,625,000 791,728 9,416,728
Totals $ 44.385.00~00 ~ ~
and the
The New York State Environmental Facilities Corporation (NYSEFC) completed a refinancing, of the
EFC's bonds, which will reduce the Town's future interest cost for the Clean Water and Drinking of
Water State Revolving Funds (SRF). The net present value of the savings is $8,212. There was no
change to the principal amounts of the bonds.
-36-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
DETAILED NOTES ON ALL FUNDS (continued)
4. INDEBTEDNESS (continued)
CHANGES IN LONG-TERM LIABILITIES
Long-term liability activity for the year ended December 31,2011 is as follows:
Non-current
liabilities
Primary Government:
Generalobligationbonds $ 31,300,000 $ 13,175,000 $
Due to Employees Retirement
System 312,837
Net compensated absences 7,544,371 532,431
Claims and judgments 278,739 4,072,651
Estimated liability for landfill closure
and post~losure care costs 993,336
Other postemployment benefits payable 13,707,939 6,895,930
Component Units:
Bond anticipation notes 750,000 650,000
General obligation bonds 2,075,000
Net compensated absences 216,209
Other postemployment benefits payable 302,137 21,018
1,990,0OO $ 42,485,000 $ 2,480,000
71,928 240,909
589,511 7,487,291 90,000
3,055,055 1,296,335 1,296,335
$ 40,005,000
240,909
7,397,291
24,230 969,106 24,540 944,566
1,650,960 18,952,909 18,952,909
750,000 650,000 650,000
175,000 1,900,000 175,000 1,725,000
2,297 213,912 52,329 161,583
323,155 323,155
Liabilities for general obligation bonds, general liability claims and judgments and landfill closure
and post closure care costs are liquidated through future budgetary appropriations in the
General Fund. The liabilities for compensated absences, medical claims and judgments, other
postemployment benefits, and due to Employees' Retirement System are liquidated through
future budgetary appropriation in the fund that gave rise to the liability.
RETIREMENT SYSTEM
Plan Description
The Town of Southold participates in the New York State and Local Employees' Retirement System
(ERS) and Local Police and Fire Retirement System (PFRS). This is a cost-sharing multiple-
employer retirement system. The System provides retirement benefits as well as death and
disability benefits.
Obligation of employers and employees to contribute and benefits to employees are governed
by the New York State Retirement and Social Security Law (NYSRSSL). As set forth in the
NYSRSSL, the Comptroller of the State of New York (Comptroller) serves as sole trustee and
administrative head of the System. The Comptroller shall adopt and may amend rules and
regulations for the administration and transaction of the business of the System and for the
custody and control of their funds. The System issues a publicly available financial report that
includes financial statements and required supplemental information. That report may be found at
http://www.osc.state.ny.us/retire/pubtications/index.php or obtained by writing to the New York State
and Local Retirement System, 110 State Street, Albany, NY 12244-0001.
Fund n~ Policy
The System is noncontributory except for employees who joined the New York State and Local
Employees' Retirement System after July 27, 1976 who contribute 3% of their salary for the first ten
years of membership and employees who joined on or after January 1, 2010 who generally
contribute 3% of their salary for the entire length of service. Under the authority of the NYSRSSL,
the Comptroller annually certifies the actuarially determined rates expressed as proportions of
payroll members, used in computing the employers' contributions based on salaries paid during the
System's fiscal year ending March 31.
-37-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
DETAILED NOTES ON ALL FUNDS (continued)
5. RETIREMENT SYSTEM (continued)
Fundinq Policy (continued)
The Town is required to contribute at an actuarially determined rate. The actual contributions were
equal to 100% of the actuarially required amounts and also include additional contributions to fund
various early retirement incentives made available to the Town employees. The credits and
miscellaneous adjustments represent modification made by the NYSERS to the prior year's
contributions due to differences between estimated and actual salaries for the plan year.
The required contributions, for the Town, for the current year and two preceding years were:
ERS PFRS
2011 $ 1,827,936 $ 1,308,331
2010 1,265,284 957,407
2009 794,550 861,865
Pursuant to Chapter 105 of the Laws of 2010, the New York State Legislature authorized local
governments to make available a retirement incentive program with estimated total costs to the
Town of $312,837. The cost of the program is being billed and paid over five years beginning in
2012 and will include interest at 5.0%. Future principal and interest payments to maturity are as
follows:
Principal Interest
Total
Principal
and Interest
Foryears ending December31,2012 $ -0- $ ~0- $ -0-
2013 53,859 18,069 71,928
2014 57,899 14,029 71,928
2015 62,241 9,687 71,928
2016 66,910 5,018 71,928
Totals $ 240~909 $ 46.803 $ 287,712
6. OTHER POSTEMPLOYMENT BENEFITS (OBLIGATIONS FOR HEALTH INSURANCE)
In the government-wide financial statements, the cost of postemployment healthcare benefits,
like the cost of pension benefits, generally should be associated with the period in which the
cost occurs, rather than in the future year when it will be paid. In adopting the requirements of
GASB 45, during the year ended December 31, 2008, the Town recognizes the cost of post-
employment healthcare in the year when the employee services are received reports the
accumulated liability from prior years and provide information useful in assessing potential
demands on the Town's future cash flows. Recognition of the liability accumulated from prior
years will be phased in over 30 years, which commenced with the 2008 liability.
-38-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
DETAILED NOTES ON ALL FUNDS (continued)
OTHER POSTEMPLOYMENT BENEFITS (OBLIGATIONS FOR HEALTH INSURANCE)
(continued)
Plan Description:
The Town, as a single-employer defined benefit OPEB plan, per its contracts with employees, will
pay full premium costs for medical (currently provided by the Empire Plan and the Town's self-
funded medical plan) insurance coverage at retirement. For non-police participants, the Town
provides continuation of medical insurance to employees who retire under the NYS Retirement
System or who are at least 55 years old and have 10 years of service with the Town. For police, the
Town provides continuation of medical insurance for employees who have at least 20 years of
service with the Town. The retiree and spouse are eligible for full Medicare premium reimbursement
in the amount of $1,661 for police and $1,385 for others. Healthcare benefits for non-union
employees are similar to those of union employees. Surviving spouses of deceased employees
may continue coverage by paying the premium equivalent for participants. They are also entitled to
Medicare part B premium reimbursement.
The number of participants as of January 1, 2011, the effective date of the OPEB valuation is as
follows. There have been no significant changes in the number or type of coverage since that date.
Active em ployees 192
Retirees 208
Spouses of retired employees 5
Total 405
Fundinq Policy:
The Town currently pays for postemployment health care benefits on a pay-as-you-go basis.
Annual Other Postemployment Benefits Cost and Net Obligation:
For the year ended December 31, 2011, the Town's annual other postemployment benefits cost
(expenses) were $6,624,103. Considering the annual expense as well as the payment of current
health insurance premiums, which totaled $1,650,960 for retirees and their beneficiaries, the result
was an increase in the other postemployment benefits liability of $5,244,970 for the year ended
December 31, 2011. The Town's component unit's annual other postemployment benefits cost
(expenses) were $31,657. Considering the annual expense as well as the payment of current
health insurance premiums, which totaled $10,639 for retirees, the result was an increase in the
other postemployment benefits liability of $21,018 for the year ended December 31,2011.
Benefit Obliqations and Normal Cost
Retired employees $ 33,669,512
Active employees
Unfunded actuarial accrued liability (UAAL)
40,697,296
$ 74.366.808
The Town's annual other postemployment benefit cost is calculated based on the annual required
contribution (ARC) of the employer, an amount actuarially determined in accordance with the
parameters of GASB Statement No. 45. The ARC represents a level of funding that, if paid on an
ongoing basis, is projected to cover normal cost each year and amortize any unfunded actuarial
liabilities (or funding excess) over a period not to exceed thirty years.
-39-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31, 2011
DETAILED NOTES ON ALL FUNDS (continued)
6. OTHER POSTEMPLOYMENT BENEFITS (OBLIGATIONS FOR HEALTH INSURANCE)
(continued)
Annual Other Postemployment Benefits Cost and Net Obliqation: (continued)
The Town's annual other postemployment benefits cost, the amount actually paid and changes to
the Town's net other postemployment benefits obligation to the Plan for the year ended December
31,2011 are as follows:
Normal Cost
Amortization of unfunded actuarial
liability (UAAL) over 30 years
Interest
Annual required contribution (ARC)
Interest on net other
postemployment benefits obligation
Adjustment to ARC
Annual OPEB cost (expense)
Less: contribution for year ended
December 31,2011
Increase in net OPEB obligation
Net OPEB obligation - beginning of year
Net OPEB obligation - end of year
Percent of annual OPEB cost contributed
Funded Status and Fundin~q Pro~lress:
$ 2,737,290
4,135,231
274,901
7,147,422
564,197
(815,689)
6,895,930
1,650,960
5,244,970
13,707,939
23.94%
The percentage contributed, as it relates to the Town of Southold, for the current year and
preceding year was:
Annual
Annual Contribution Percentage Net OPEB
OPEB Cost Made Contributed Obliqation
2011 $ 6,895,930 $ 1,650,960 23.94% $ 18,952,909
2010 6,624,103 1,635,730 24.69% 13,707,939
2009 6,339,666 1,294,979 20.43% 8,719,566
The schedule of funding progress presents trend information about whether the actuarial value of
plan assets is increasing or decreasing over time relative to the actuarial accrued liability for
benefits.
The funded status of the plan as of January 1,2011 is as follows:
Town $
Component Units
Actuarial Accrued Unfunded UAAL as a Percentage
Value of Liability AAL Funded Covered of
Assets (AALI (UAAL) Ratio Payroll Payroll
-0- $ 74,366,808 $ 74,366,808 0% $13,634,750 545.42%
~- 422,080 422,080 0% 922,554 45.75%
-40-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
DETAILED NOTES ON ALL FUNDS (continued)
OTHER POSTEMPLOYMENT BENEFITS (OBLIGATIONS FOR HEALTH INSURANCE)
(continued)
Actuarial Methods and Assumptions:
The projection of future benefits for an ongoing plan involves estimates of the value of reported
amounts and assumptions about the probability of occurrence of future events far into the future.
Amounts determined regarding the funded status of a plan and the employer's annual required
contributions are subject to continual revision as actual results are compared with past expectations
and new estimates are made about the future.
Projections of benefits for financial reporting purposes are based on the substantive plan (the plan
as understood by the employer and the plan members) and include the types of benefits provided
at the time of each valuation and the historical pattern of sharing benefit costs between the
employer and plan members to that point. The actuarial methods and assumptions used include
techniques that are designed to reduce the effects of short-term liability in actuarial accrued
liabilities, consistent with the long-term perspective of the calculations.
In the January 1, 2011 actuarial valuation, the liabilities were computed using the projected unit
credit cost method and the level dollar amortization method. The actuarial assumptions utilized a
4% discount rate. The valuation assumes a 10% healthcare cost trend increase for the year,
reduced by decrements down to 5% in fiscal year 2016. The remaining amortization period at
December 31,2011 was twenty six years.
7. COMPENSATED ABSENCES
Town employees are granted vacation and sick leave and earn compensatory absences in
varying amounts. In the event of termination or upon retirement, an employee is entitled to
payment for accumulated vacation and sick leave and unused compensatory absences at
various rates subject to certain maximum limitations.
Estimated vacation, sick leave and compensatory absences accumulated by governmental fund
type employees have been recorded in the statements of net assets. Payment of vacation time and
sick leave is dependent upon many factors; therefore, timing of future payments is not readily
determinable. However, management believes that sufficient resources will be made available for
the payments of vacation, sick leave and compensatory absences when such payments become
due. As of December 31,2011, the value of the accumulated vacation time and sick leave was
$7,487,291 for the primary government.
COMMITMENTS AND CONTINGENCIES
Risk Management
In common with other municipalities, the Town receives numerous notices of claims. The Town
established a self-insurance risk management program for general liability and health insurance which
are both accounted for in the Risk Retention Fund.
For the year ended December 31, 2011, the Town has a deductible liability exposure of $50,000 per
claim for General Liability, $25,000 per claim for Automobile Liability, Police Liability and Employee
Benefits, and $10,000 per claim for Public Officials and Employment Practices. Any liability exposure
above the deductible amounts is covered by primary insurance policies up to $1,000,000 per claim for
General Liability, Public Officials, Police and Employment Practices, and Employee Benefits.
Aggregate exposures are $1,000,000 per claim for Public Officials, Police and Employment Practices,
$3,000,000 for Employee Benefits and General Liability. After primary policy limits are exhausted, the
excess exposure above the per claim or aggregate limits is covered by an Umbrella Liability Policy of
$10,000,000 per claim and $10,000,000 in the aggregate.
-41-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31, 2011
COMMITMENTS AND CONTINGENCIES (continued)
Risk Management (continued)
For insurance for health benefits that are self-insured, the Town has insurance policies which provide
coverage for specific medical cases in excess of $100,000 incurred during the year and paid within
three months after year end, as well as coverage for all other claims in the aggregate. The exposure
to the Town under the aggregate policy is based on monthly enrollment. Considering the changes to
enrollment during 2011, the attachment point for the aggregate policy was $4,045,385.
There have been no significant reductions in insurance coverage as compared to the prior year, and
there were no settlements in excess of insurance coverage over the last three years.
The Risk Retention Fund reserves for general liability claims are determined by a third party
administrator, and are reported when it is probable that a loss has occurred and the amount of that loss
can be reasonably estimated. Claims reserves for general liability claims are re-evaluated periodically to
take into consideration recently settled claims and any new developments and changes.
The Risk Retention Fund liabilities for medical claims outstanding at year end are reported by the third
party administrator, and are recorded when it is probable that a loss has occurred and the amount of that
loss can be reasonably estimated. Claims reserves for the general liability claims are re-evaluated
periodically to take into consideration recently settled claims and any new developments and changes.
The Risk Retention Fund liabilities for medial claims outstanding at year end are reported by the third
party administrator and are recorded when the claim has been incurred and paid within 60 days of the
year end.
The Town's discretely presented component units are not included in the Town's self-insurance risk
management program for any claims.
Net assets in the Risk Retention Fund are reserved for future catastrophic losses and are not available
for other uses. Changes in the liability for claims and judgments for the year ended December 31,
2011 and 2010 are as follows:
General
Medical Liability
2011 2010 2011 2010
Unpaid Claims as of December 31,
prior year
$ 272,213 $ 168,376 $ 6,526 $ 3,396
Incurred Claims:
Provision for insured events
of the current fiscal year
Increase (decrease) in net provision for
insured events of prior fiscal years
Total Incurred Claims and
Claim adjustments
4,041,144 3,021,789 4,684 25,000
(5,013) 8,075 (3,040) 9,656
4,036,131 3,029,864 8,170 38,052
Payments of:
Claims during the current year
3,018,374 2,926,027 1,805 31,526
Unpaid Claims as of December 31,
current year
$ 1.289.97~0 ~ $
6.365 $ 6~526
-42-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31,2011
COMMITMENTS AND CONTINGENCIES (continued)
Landfill Closure and Post-Closure Care Costs
State and federal laws and regulations required the Town to place a final cover on its landfill sites and to
perform certain maintenance and monitoring functions at the sites for thirty years after closure. The Town
ceased accepting waste at its Cutchogue landfill as of October 8, 1993. Accordingly, as of December
31, 2011 the Town has recorded a liability of $969,106, in the government-wide financial statements
which represents the provision to be made in future budgets for unfunded closure and postclosure landfill
costs. As the liability is based on 100% of capacity there are no estimated costs of closure or postclosure
remaining to be recognized. Actual costs may vary due to inflation or deflation, changes in technology, or
changes in regulations or applicable laws.
Construction and Other Capital Acquisition Commitments
The Town is committed to capital improvements to its various facilities and infrastructure. The Town at
December 31, 2011 has funds restricted or assigned for capital acquisitions and improvements of
$219,716 in the Capital Projects Fund.
Animal Shelter Agreement
In May 2011, the Town entered into an agreement with The North Fork Animal Welfare League to
operate and manage the Town of Southold Animal Shelter. The agreement is for a term of four years
commencing on June 1,2011. The future payments associated with this agreement are as follows:
2012 $ 208,588
2013 214,845
2014 217,484
2015 90,618
$ 731.535
Lease Commitments and Leased Assets
The Town leases property and equipment under operating leases. Total rental expenditures on such
leases for the year ended December 31, 2011 were $247,410. Future obligations over the primary
terms of the Town's leases as of December 31,2011 are as follows:
2012 $ 229,742
2013 123,069
2014 95,349
2015 86,643
2016 and thereafter 234,072
Total $ 768.875
-43-
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31, 2011
CONDENSED FINANCIAL STATEMENTS FOR THE DISCRETELY PRESENTED
COMPONENT UNITS
The following represents condensed financial statements for the discretely presented component units as
of and for the year ended December 31,2011:
Condensed Statement of Net Assets:
Due from Capital Assets Other
Current Primal, Net of Current Long-Term Net
Assets Government Depreciation Liabilities Liabilities Assets
Fishers Island Ferry Distdct $ 930,066
Fishers Isiand Waste Management District 930,983
Cutchogue-New Suffolk Park District (unaudited) 121,156
Southold Park District (unaudited) 58,190
Orient-East Marion Park Distdct (unaudited) 7,625
Mattituck Park District (unaudited) 465,661
Odent Mosquito District (unaudited) 6,633
$ 225,559 $ 11,099,901 $ 1,352,411 $ 2,209,738 $ 8,693,377
158,463 2,756,020 173,429 3,672,037
39,097 118,420 39,097 239,576
94,734 853,017 109,718 926,223
11,789 432,985 11,789 440,610
121,759 1,647,246 129,093 2,105,573
24,060 8,031 24,060 14,664
$ 2,520,314 $ 675,461 $ 16,945,620 $ 1,839,597 $ 2,209,738 $ 16,092,060
Program C-C-C-C-C-C-C-C-C-C~ e r al Rever~ue Net AsseM
Properly
Expenses Revenue Net E.xpense Tax Other Change 1/1111 12/31/11
Fishers Island Ferry Dietnct $ 3,654,576 $ 2,657,466 $ 997,110 $ 650,000 $ 196,283 $ (150,827) $ 8,8~4,204 $ 8,693,377
Fishers Island Waste
Management Distdc~ 621,174 48,857 572,317 510r6~0 3,340 (52,317) 3,724,354 3,672,037
Cutchogue-New Suffolk Park
District(unaudited) 118,668 115,668 130,000 691 12,023 227,553 239,576
Southold Park Distdct (uPaudited) 336,276 336,276 315,000 34,54t 13,265 912,958 926,223
Ofient-Eaet Madon Park DiMdct (unaudited) 34,801 34,801 34,250 2,428 1,877 438,733 440,610
Mat~tuck Park Distdct (unaudited) 34~,037 344,037 432,360 44,894 133,217 1,972,356 2,105,573
Odent Mosquito Oistdct (unaudited) 78,463 78,463 80,000 35 1,572 13,092 14,664
$ 5,187,995 $ 2,706,323 $ 2,481,672 $ 2,158,270 $ 282,212 $ (41,190) $ 15,133,250 $ 16,092,060
Complete financial statements of these component units can be obtained from their respective
administrative offices:
Orient Mosquito District
145 Platt Road
Orient, NY 11957
Cutchogue-New Suffolk
Park District
P.O. Box 311
Cutchogue, NY 11935
Southold Park District
P.O. Box 959
Southold, NY 11971
Fishers Island Ferry District
P.O. Box 1179
Southold, NY 11971
Fishers Island Waste
Management District
Fishers Island, NY 06390
Orient-East Marion
Park District
P.O. Box 12
Orient, NY 11957
Mattituck Park District
P.O. Box 1413
Mattituck, NY 11952
TOWN OF SOUTHOLD
NOTES TO FINANCIAL STATEMENTS
December 31, 2011
2% TRANSFER TAX
In November 1998, the voters of the Town approved a referendum for a 2% transfer tax, which became
effective on April 1, 1999. The transfer tax receipts are recorded in the Community Preservation Fund,
and are used for the purchase and/or preservation of agricultural land, open space, parks, or historic
preservation sites. The tax applies to sales of vacant land worth $100,000 or more or sales or improved
land worth $250,000 or more. Conveyance of real property for open space, parks or historic preservation
purposes are exempt from this tax.
At December 31, 2011, and for the four previous years, the Town has the following 2% transfer tax
revenue which was utilized for the conservation, environmental or historic preservation purposes
expenses of:
Revenues Expenditures
Yearend December31,2011 $ 14,867,962 $ 10,025,132
2010 6,588,824 8,731,929
2009 3,040,294 4,599,624
2008 5,251,258 17,624,096
2007 6,071,436 2,423,659
SUBSEQUENT EVENTS
In April 2012, the Town renewed a BAN in the amount of $715,000 at .40% paying $1,142,000 of an
existing BAN in the amount of $1,857,000.
In September 2012, the Town renewed a BAN in the amount of $800,000 at .50% paying $455,000 of
an existing BAN in the amount of $1,135,000.
On October 29, 2012, Hurricane Sandy made landfall on Long Island, affecting the Town of Southold.
As of the date of this report, the Town's capital assets do not appear to be severely damaged or
impaired, however there were additional expenditures which were incurred and will continue to be
incurred, relating to the clean-up and the maintaining of public safety conditions in the Town.
Management is not able to quantify the total costs of this storm at this time, however the Town will
apply for Federal and/or State aid, as available, to assist with these costs. Based on past experience,
aid has been made available to the Town for similar storm costs.
NEW PRONOUNCEMENTS
The Governmental Accounting Standards Board (GASB) has issued Statement No. 60 "Accounting
and Financial Reporting for Service Concession Arrangements." This statement addresses how to
account for and report service concession arrangements. The requirements of the new statement
become effective for fiscal periods beginning after December 15, 2011.
The Government Accounting Standards Board (GASB) has issued Statement No. 61 "The Financial
Reporting Entity: Omnibus - an amendment of GASB Statement No, 14 and 34." This statement modifies
certain requirements for inclusion of component units in the financial reporting entity. The requirements of
the new statement become effective for fiscal periods beginning after June 15, 2012.
The Governmental Accounting Standards Board (GASB) has issued Statement No. 63 "Financial
Reporting of Deferred Outflows of Resources, Deferred Inflows of Resources, and Net Position." This
statement is for presentation purposes only. The requirement of the new statement becomes effective for
fiscal periods beginning after December 15, 2011.
The Town is currently evaluating the impact of the above pronouncements.
-45-
REQUIRED SUPPLEMENTARY
INFORMATION OTHER THAN
MANAGEMENT DISCUSSION AND
ANALYSIS
TOWN OF SOUTHOLD
GENERAL FUND
SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCE - BUDGET AND ACTUAL
Year ended December 31, 2011
REVENUES
Real property taxes
Other real property tax items
Non-property tax items
Departmental income
Intergovernmental charges and local aid
Use of money and property
Licenses and permits
Fines and forfeitures
Sale of property and compensation for loss
Miscellaneous local sources
Interfund revenues
State aid
Federal aid
Total Revenues
EXPENDITURES
General government support
Public safety
Public health
Transportation
Economic assistance and opportunity
Culture and recreation
Home and community services
Employee benefits
Debt service - principal and interest
Total Expenditures
Excess (Deficiency) of Revenues
Over Expenditures
Other Financing Uses
Transfers out
Total Other Financing Uses
Net Change in Fund Balance
Fund Balance at Beginning of Year
Fund Balance at End of Year
Variance
Original Final Positive
Budget Budget Actual ~
$21,734,453 $ 21,734,453 $ 21,734,453
84,000 84,000 85,765 $ 1,765
885,473 885,473 885,473
406,000 525,500 529,774 4,274
397,085 445,045 271,087 (173,958)
275,000 275,000 270,073 (4,927)
281,480 281,480 269,551 (11,929)
200,500 200,500 184,388 (16,112)
77,625 1,073,762 1,024,171 (49,591)
218,323 241,713 310,392 68,679
30,000 30,000 30,000
1,239,000 1,287,024 t,133,604 (153,420)
95,000 323,144 508,605 185,461
25,923,939 27,387,094 27,237,336 (149,758)
7,126,796 6,893,230 5,796,536 1,096,694
9,457,872 10,035,674 9,247,050 788,624
33,800 34,300 33,788 512
505,900 515,563 474,404 41,159
1,214,650 1,214,229 1,165,355 48,874
310,073 312,073 277,281 34,792
443,251 446,575 419,977 26,598
7,302,251 8,297,839 7,534,913 762,926
820,500 820,500 800,115 20,385
27,215,093 28,569,983 25,749,419 2,820,564
(1,291,154) (1,182,889) 1,487,917 2,670,806
(649,846) (759,073) (686,286) 72,787
(649,846) (759,073) (686,286) 72,787
$ (1,941,000) $ (1,941,962) 801,631 $ 2,743,593
7,423,101
$ 8,224,732
See notes to the financial statements.
-46-
TOWN OF SOUTHOLD
HIGHWAY FUND
SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCES - BUDGET AND ACTUAL
Year ended December 31,2011
REVENUES
Real property taxes
Other real property tax items
Use of money and property
Licenses and permits
Sale of property and compensation
for loss
State aid
Federal Aid
Total Revenues
Variance
Original Final Positive
Budget Budget Actual (Negative)
$ 4,586,896 $ 4,586,896 $ 4,586,896
6,500 6,500 7,148 $ 648
6,000 6,000 6,583 583
4,000 4,000 10,410 6,410
30,000 30,000 9,950 (20,050)
326,819 363,736 416,217 52,481
128,287 240,253 111,966
4,960,215 5,125,419 5,277,457 152,038
EXPENDITURES
General government support 7,100
Transportation 3,341,524
Employee benefits 1,612,226
Debt service - principal and interest 99,215
Total Expenditures
Excess (Deficiency) of Revenues
Over Expenditures
Other Financing Uses
Transfers out
Total Other Financing Uses
Net Change in Fund Balance
Fund Balance at Beginning of Year
Fund Balance at End of Year
7,100 6,283 817
3,517,178 3,175,948 341,230
1,612,226 1,517,515 94,711
99,215 96,657 2,558
5,060,065 5,235,719 4,796,403 439,316
(99,850) (110,300) 481,054 591,354
(129,000) (129,000) (129,000) -0-
(129,000) (129,000) (129,000) -0-
$ (228,850) $ (239,300) 352,054 $ 591,354
642,466
$ 994,520
See notes to the financial statements.
~47-
TOWN OF SOUTHOLD
COMMUNITY PRESERVATION FUND
SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES
IN FUND BALANCES - BUDGET AND ACTUAL
Year ended December 3'1, 20'11
REVENUES
Non-property tax items
Use of money and property
Miscellaneous local sources
State aid
Federal Aid
Total Revenues
EXPENDITURES
Home and community services
Debt service - principal and interest
Total Expenditures
Excess (Deficiency) of Revenues
Over Expenditures
Other Financing Sources Debt proceeds
Total Other Financing Sources
Net Change in Fund Balance
Fund Balance at Beginning of Year
Fund Balance at End of Year
Variance
Original Final Positive
Budget Budget Actual (Negative)
$ 2,860,000 $ 2,880,000 $ 3,570,355 $ 690,355
15,000 15,000 29,884 14,884
100 100
7,500 (7,500)
1,267,623 1,267,623
2,895,000 2,902,500 4,867,962 1,965,462
3,459,000 13,466,500 8,389,229 5,077,271
1,636,000 1,636,000 1,635,903 97
5,095,000 15,102,500 10,025,132 5,077,368
(2,200,000) (12,200,000) (5,157,170) 7,042,830
10,000,000 10,000,000 -0-
10,000,000 10,000,000 -0-
$(2,200,000) $(2,200,000) 4,842,830 $ 7,042,830
6,002,350
$10,845,180.
See notes to the financial statements.
-48-
TOWN OF SOUTHOLD
POSTEMPLOYMENT BENEFITS HEALTHCARE COSTS - SCHEDULE OF FUNDING
PROGRESS
Year ended December 31,2011
Unfunded
Liability as a
Actuarial Actuarial Actuarial Percentage of
Valuation Date Value of Accrued Unfunded Covered
January 1, Assets Liability Liability Funded Ratio Covered Payroll Payroll
2011 $ -0- $ 74,366,808 $ 74,366,808 0.00% $13,634,750 545.42%
2010 -0- 66,597,849 66,597,849 0.00% 15,492,700 429.87%
2009 -0- 62,493,280 62,493,280 0.00% 14,754,952 423.54%
2008 -0- 45,806,258 45,806,258 0.00% 13,830,871 331.19%
-49-
OTHER SUPPLEMENTARY
INFORMATION
TOWN OF SOUTHOLD
COMBINING BALANCE SHEET
NON-MAJOR GOVERNMENTAL FUNDS
December 31~ 2011
ASSETS
Cash and investments
Accounts receivable
Due from other funds
State and federal receivables
Prepaids
LIABILITIES AND FUND BALANCE
LIABILITIES
Accounts payable
Deferred revenue
FUND BALANCE
Nonspendable
Restricted
Assigned
Total Assets
Total Liabilities
Total Fund Balance
Total Liabilities and Fund Balance
General Fund
Part Town
$ 543,068
80,318
224,182
59,755
38,324
East-West Fire Southold Fishers Solid Waste
Special Protection Wastewater Island Sewer Management
Grant District District District District
$ 23,798
$ 12,533 223,570
765
$ 945,647 $ 13,298 $ 247,368
$ 10,865 $ 3,315 $ 13,136
240,620 223,570
251,485 3,315 236,706
38,324
9,983
655,838 10,662
694,162 9,983 10,662
$ 945,647 $ 13,298 $ 247,368
$ 81,049
30,501
$ 111,550
$ 30,481
30,481
81,069
81,069
$ 111,550
$ 23,485
6,300
$ 29,785
$ 83
83
29,702
29,702
$ 29,785
$ 252,151
133,118
728,941
113,409
39,589
$ 1,267,208
$ 239,194
584,481
823,675
39,589
403,944
443,533
$ 1,267,208
Totals
$ 923,551
213,436
1,226,027
173,929
77,913
$2,614,856
$ 266,593
1,079,152
1,345,745
77,913
9,983
1,181,215
1,269,111
$2,614,856
-50-
TOWN OF SOUTHOLD
COMBINING STATEMENT OF REVENUES, EXPENDITURES AND CHANGES
IN FUND BALANCES - NON-MAJOR GOVERNMENTAL FUNDS
For the year ended December 31, 2011
REVENUES
Real property taxes
Other real property tax items
Non-property tax items
Departmental income
Use of money and property
Licenses and permits
Sale of property and compensation for loss
Miscellaneous local sources
State aid
Federal aid
EXPENDITURES
General government support
Public safety
Home and community services
Employee benefits
Debt service:
Principal
Interest
Excess (Deficiency) of Revenues
Over Expenditures
Other Financing Uses:
Transfers out
East-West Fire Southold
General Fund Special Protection Wastewater
Part Town Grant District District
$ 783,364 $ 712,563
1,222 39
314,260
635,776
2,284 377
5,100
171
89,557
$ 9,983
112,145
Total Revenues 1,831,734 122,128 712,979
Total Expenditures
Total Other Financing Uses
Net Change in Fund Balance
Fund Balances (Deficit) at Beginning of Year
51,506
574,841
642,698
568,933
1,837,978
(6,244)
(6,244)
700,406
$ 694,162
Fund Balances at End of Year
112,145
112,145
9,983
9,983
$ 9,983
708,739
708,739
4,240
4,240
6,422
$ 10,662
Fishers
Island Sewer
District
$ 8O5 $ 31,042
5O6 67
1,311
336
2,175
3,390
5,901
(4,590)
(169,407)
(169,407)
(173,997)
255,066
$ 81,069
31,109
23,003
6,000
4,194
33,197
(2,088)
(2,088)
31,790
$ 29,702
Solid Waste
Management
District
$1,877,246
103
1,833,928
12,288
162,984
358,288
59,905
85,244
4,389,986
23,933
2,746,578
612,705
457,900
194,678
4,035,794
354,192
(155,764)
(155,764)
198,428
245,105
$ 443,533
Totals
$3,373,173
1,364
314,260
2,501,551
15,522
168,084
358,459
9,983
149,462
197,389
7,089,247
75,439
1,283,580
3,524,760
1,181,638
466,075
202,262
6,733,754
355,493
(325,171)
(325,171)
30,322
1,238,789
$1,269,111
-51-
DISCRETELY PRESENTED COMPONENT UNITS
ASSETS
Current Assets:
Cash and investments
Accounts receivable
Due from primary government
Prepaid charges
Total Current Assets
Non-Current Assets:
Non-depreciable capital assets
Depreciable capital assets, net of depreciation
Total Non-Current Assets
Total Assets
LIABILITIES
Current Liabilities:
Accounts payable and accrued liabilities
Accrued interest payable
Bond anticipation notes payable
Due to other governments
Unearned revenue
Non-current liabilities due within one year
General obligation bonds payable
Compensated absences payable
Total Current Liabilities
Non-Current Liabilities:
General obligation bonds payable
Compensated absences payable
Other postemployment benefits payable
Total Non-Current Liabilities
Total Liabilities
NET ASSETS
Investment in capital assets, net of related debt
Unrestricted
Total Net Assets
TOWN OF SOUTHOLD
DISCRETELY PRESENTED COMPONENT UNITS
COMBINING STATEMENT OF NET ASSETS
December 31,2011
Fishers Fishers Island Cutchogue- Southold Orient-East Mattituck Orient
Island Ferry Waste Management New Suffolk Park Marion Park Park Mosquito
District District Park District District District District District
(Audited) (Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Totals
$ 811,742 $ 919,959 $ 121,156 $ 58,190 $ 7,625 $ 465,661 $ 6,633 $ 2,390,966
44,813 835 45,648
225,559 158,463 39,097 94,734 11,789 121,759 24,060 675,461
73,511 10,189 83,700
1,155,625 1,089,446 160,253 152,924 19,414 587,420 30,693 3,195,775
41,717 517,262 101,198 588,849 432,985 511,342 2,193,353
11,058,184 2,238,758 17,222 294, t68 1,135,904 8,031 14,752,267
11,099,901 2,756,020 118,420 883,017 432,985 1,647,246 8,031 16,945,620
12,255,526 3,845,466 278,673 1,035,941 452,399 2,234,666 38,724 20,141,395
222,110
27,206
650,000
225,766
175,000
52,329
12,639 14,984 7,334 257,067
27,206
650,000
2,327 2,327
158,463 39,097 94,734 11,789 121,759 24,060 675,668
175,000
52,329
1,352,411 173,429 39,097 109,718 11,789 129,093 24,060 t,839,597
1,725,000 1,725,000
161,583 161,583
323,155 323,155
2,209,738 -0- -0- -0- -0- -0- -0- 2,209,738
3,562,149 173,429 39,097 109,718 11,789 129,093 24,060 4,049,335
8,549,901 2,756,020 912,960 1,647,246 13,866,127
143,476 916,017 239,576 13,263 440,610 458,327 14,664 2,225,933
$ 8,693,377 $ 3,672,037 $ 239,576 $ 926,223 $ 440,610 $ 2,105,573 $ 14,664 . $ 16,092,060
-52-
TOWN OF SOUTHOLD
DISCRETELY PRESENTED COMPONENT UNITS
COMBINING STATEMENT OF ACTIVITIES
Year ended December 31,2011
REVENUES
Program revenues
Real property taxes
Other real property tax items
Non-property tax items
Interest earnings
State Aid
Federal Aid
Other
EXPENSES
General government support
Public health
Transportation
Culture and recreation
Home and community services
Interest on debt
Changes in Net Assets
Net Assets at Beginning of Year
Fishers Fishers Island Cutchogue- Southold Orient-East Mattituck Odent
Island Ferry Waste Managemenl New Suffolk Park Marion Park Park Mosquito
District District Park District District District District District
(Audited) (Audited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Totals
$ 2,587,181 $ 48,857 $ 2,636,038
650,000 516,660 $ 130,000 $ 315,000 $ 34,250 $ 432,360 $ 80,000 2,158,270
36 28 7 17 2 24 4 118
1,757 3,312 684 694 91 3,630 31 10,199
5,763 5,763
64,522 64,522
194,490 33,830 2,335 41,240 271,895
3,503,749 568,857 130,691 349,541 36,678 477,254 80,035 5,146,805
233,147 233,147
78,463 78,463
3,323,353 3,323,353
14,992 118,668 336,276 34,801 343,842 848,579
621,174 621,174
83,084 195 83,279
3,654,576 621,174 118,668 336,276 34,801 344,037 78,463. 5,187,995
(150,827) (52,317) 12,023 13,265 1,877 133,217 1,572 (41,190)
8,844,204 3,724,354 227,553 912,958 438,733 1,972,356 13,092 16,133,250
Net Assets at End of Year $ 8,693,377 $ 3,672,037 $ 239,576 $ 926,223 $ 440,610 $ 2,105,573 $ 14,664 $16,092,060
-53-
TOWN OF SOUTHOLD
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
Year ended December 31,2011
Federal GrantoflPass-through Grantor/
Proqram or Cluster Title
U. S. Department of Housing and Urban Development
Pass-through program from:
Suffolk County, New York
Community Development Block Grant Program
U.S. Department of Health and Human Services
Pass-through program from:
Suffolk County, New York
Special Programs for the Aging - Title III,
Part C - Nutrition
Nutrition Services Incentive Program
Direct program from:
Early Retiree Reinsurance Program
U.S. Department of Transportation
Pass-through program from:
New York State
Highway Planning and Construction
Pass-through program from:
New York State
Selective Traffic Enforcement Program
Pass-through program from:
New York State
Safety Incentive Grants for the Use of Seatbelts
U.S. Department of Agriculture
Direct program from:
National Resource Conservation Service
Farm and Ranchland Protection Program
U.S. Department of the Interior
Pass-through program from:
New York State
Clean Vessel Act
U.S. Department of Justice
Direct program from:
Bulletproof Fest Partnership Program
Pass -
Federal Through
CFDA Identifying
Number Number
14.218
93.045 SCS10000001792
93.053 SCS10000001792
93.546
20.205 C022403/D030245
20.600
20.604 PT-5259081
10.913
15.616
16.607
Federal
Expenditures
$ 112,145
74,280
26,950
10,637
10,898
6,378
3,405
1,267,623
9,265
19,477
See accompanying notes to schedule of expenditures of federal awards
-54-
TOWN OF SOUTHOLD
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
December 31, 2011
U.S. Department of Homeland Security
Pass-through program from:
New York State
Severe Storms and Flooding
Severe Winter Storm, December 2010
Hurricane irene, August 2011
Pass-through program from:
New York State and Suffolk County
Homeland Security Grant Program
Total expenditures of federal awards
97.036
97.036
97.036
97.067
FEMA-1899 DR-NY
FEMA-1957-DR-NY
FEMA-4020-DR-NY
31,302
331,374
303,176
6,960
See accompanying notes to schedule of expenditures of federal awards
-55-
TOWN OF SOUTHOLD
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
December 31,2011
Note A - Basis of Presentation
The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Town of
Southold and is presented on the modified accrual basis of accounting. The information in this schedule is
presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and
Non-Profit Or~lanizations. Therefore, some amounts presented in this schedule may differ from amounts
presented in, or used in the preparation of, the basic financial statements.
Note B - Summary of Significant Accounting Policies
(~)
Expenditures reporLed on the Schedule are reported on the accrual basis of accounting. Such
expenditures are recognized following the cost principles contained in OMB Circular A-87, Cost Principles
for State, Local and Indian Tribal Governments, wherein cedain types of expenditures are not allowable or
are limited as to reimbursement.
(2) Pass-through entity identifying numbers are presented where available.
-56-
CERTIFIED PUBLIC ACCOUNTANTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOV£RNMENTAUDITING STANDARDS
Honorable Supervisor and Town Board
Town of Southold
Southold, New York
We have audited the accompanying financial statements of the governmental activities, the discretely presented
component unit, each major fund, and the aggregate remaining fund information of Town of Southold, New York,
as of and for the year ended December 31,2011, which collectively comprise the Town of Southold, New York's
basic financial statements and have issued our report thereon dated December 4, 2012. We conducted our audit
in accordance with auditing standards generally accepted in the United States of America and the standards
applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of
the United States.
The financial statements of the Town of Southold's discretely presented component units with the exception of
two, the Fishers Island Ferry District and the Fishers Island Waste Management District, were not audited as of
the report date, nor were we able to satisf7 ourselves as to those financial activities by other auditing procedures.
The discretely presented component units audited represent 79.9%, 76.8%, and 79.1%, respectively, of the
assets, net assets, and revenues of the aggregate discretely presented component units. The financial statements
of the Fishers Island Ferry District and the Fishers Island Waste Management District were audited by other
auditors whose report thereon have been furnished to us and in our opinion, insofar as it relates to the amounts
included for those two component units, are based solely on the reports of other auditors. The financial statements
of the Fishers Island Ferry District and the Fishers Island Waste Management District were audited in accordance
with Government Auditing Standards.
Internal Control Over Financial Reportin~l
In planning and performing our audit, we considered Town of Southold, New York's internal control over financial
repor[ing as a basis for designing our auditing procedures for the purpose of expressing our opinions on the
financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Town of
Southold, New York's internal control over financial reporting. Accordingly, we do not express an opinion on the
effectiveness of the Town of Southold, New York's internal control over financial reporting.
A deficiency in internal control exists when the design or operation of a control does not allow management or
employees, in the normal course of performing their assigned functions, to prevent, or detect and correct
misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in
internal control such that there is a reasonable possibility that a material misstatement of the entity's financial
statements will not be prevented, or detected and corrected on a timely basis.
PERSONAL SERVICE. TRUSTED ADVICE.
ALBRECHT, VIGGIANO, ZURECK & COMPANY, PC
245 PARK AVENUE, 24TH FLOOR 25 SUFFOLK COURT
NEW YORK, NY 10167 HAUPPAUGE, NY11788 3715
T: 212 7~)2.4075 T. 6314249500 F:631 4349518
www avz corn
Internal Control Over Financial Reportinq (continued)
Our consideration of internal control over financial reporting was for the limited purpose described in the first
paragraph of this section and was not designed to identify all deficiencies in internal control over financial
reporting that might be deficiencies, significant deficiencies, or material weaknesses. We did not identify any
deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined
above. However, we identified certain deficiencies in internal control over financial reporting, described in the
accompanying schedule of findings and questioned costs as 2011-01 and 2011-02 that we consider to be
significant deficiencies in internal control over financial reporting. A significant deficiency is a deficiency, or a
combination of deficiencies, in internal control that is less severe than a material weakness, yet important
enough to merit attention by those charged with governance.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Town of Southold, New York's financial statements
are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations,
contracts, and grant agreements, noncompliance with which could have a direct and material effect on the
determination of financial statement amounts. However, providing an opinion on compliance with those provisions
was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests
disclosed no instances of noncompliance or other matters that are required to be reported under Government
Auditin~l Standards.
We noted certain other matters that we reported to management of the Town of Southold in a separate letter
dated December 4, 2012.
This report is intended solely for the information and use of management, Town Board, federal awarding agencies
and pass-through entities and is not intended to be and should not be used by anyone other than these specified
parties.
Hauppauge, New York
December 4, 2012
-58-
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WiTH REQUIREMENTS THAT COULD HAVE A
DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER
COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133
Honorable Supervisor and Town Board
Town of Southold
Southold, New York
Compliance
We have audited the compliance of Town of Southold, New York's, compliance with the types of compliance
requirements described in the U.S. Office of Management and Budget (OMB) Circular A-133 Compliance
Supplement that could have a direct and material effect on the Town of Southold, New York's major federal
program for the year ended December 31,2011. Town of Southold, New York's major federal program is identified
in the summary of auditors' results section of the accompanying schedule of findings and questioned costs.
Compliance with the requirements of laws, regulations, contracts, and grants applicable to its major federal
programs is the responsibility of Town of Southold, New York's management. Our responsibility is to express an
opinion on Town of Southold, New York's compliance based on our audit.
We conducted our audit of compliance in accordance with auditing standards generally accepted in the United
States of America; the standards applicable to financial audits contained in Government Auditin~l Standards,
issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local
Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and
perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance
requirements referred to above that could have a direct and material effect on a major federal program occurred.
An audit includes examining, on a test basis, evidence about Town of Southold, New York's compliance with those
requirements and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination
of Town of Southold, New York's compliance with those requirements.
in our opinion, the Town of Southold, New York, complied, in all material respects, with the requirements referred
to above that could have a direct and material effect on its major federal programs for the year ended December
31, 2011. However, the results of our auditing procedures disclosed instanced of noncompliance with those
requirements, which are required to be reported in accordance with OMB Circular A-133 and which are described
in the accompanying schedule of findings and questioned costs as items 2011-03 and 2011-04.
PERSONAL SERVICE. TRUSTED ADVICE.
ALBRECHT, VIGGIANO, ZURECK & COMPANY, PC
245 PARK AVENUE, 24TH FLOOR 25 SUFFOLK COURT
NEWYORK, NY 10167 HAUPPAUGE, NY 11788 3715
T: 212 792 4075 T: 631 434 9500 F: 631 434 9518
www avz corn
4
·
Internal Controls Over Compliance
Management of Town of Southold, New York, is responsible for establishing and maintaining effective internal
control over compliance with the requirements of laws, regulations, contracts, and grants applicable to federal
programs. In planning and performing our audit, we considered the Town of Southold, New York's internal control
over compliance with the requirements that could have a direct and material effect on a major federal program to
determine the auditing procedures for the purpose of expressing our opinion on compliance and to test and report
on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing
an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on
the effectiveness of the Town of Southold, New York's internal control over compliance.
Our consideration of internal control over compliance was for the limited purpose described in the preceding
paragraph and was not designed to identify all deficiencies in internal control over compliance that might be
significant deficiencies or material weaknesses and therefore, there can be no assurance that all deficiencies,
significant deficiencies, or material weaknesses have been identified. However, as discussed below, we identified
certain deficiencies in internal control over compliance that we consider to be material weaknesses and other
deficiencies that we consider to be significant deficiencies.
A deficiency in internal control over compliance exists when the design or operation of a control over compliance
does not allow management or employees, in the normal course of performing their assigned functions, to prevent,
or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely
basis. A material weakness in internal control ever compliance is a deficiency, or combination of deficiencies, in
internal control over compliance, such that there is a reasonable possibility that material noncompliance with a
type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely
basis. We consider the deficiencies in internal control over compliance described in the accompanying schedule of
findings and questioned costs as item 2011-04 to be a material weakness.
A significant deficiency in internal control over compliance is a deficiency or a combination of deficiencies, in
internal control over compliance with a type of compliance requirement of a federal program that is less severe
than a material weakness in internal control over compliance, yet important enough to merit attention by those
charged with governance. We consider the deficiencies in internal control over compliance described in the
accompanying schedule of findings and questioned costs as items 2011-03 to be a significant deficiency.
The Town of Southold, New York's response to the findings identified in our audit are described in the
accompanying schedule of findings and questioned costs. We did not audit the Town of Southold, New York's
response, and, accordingly, we express no opinion on the response.
This report is intended solely for the information and use of management, Town Board, others within the Town,
federal awarding agencies and pass-through entities and is not intended to be and should not be used by anyone
other than these specified parties.
Hauppauge, New York
December 4, 2012
-60-
TOWN OF SOUTHOLD
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year ended December 31,2011
SUMMARY OF AUDITORS' RESULTS
1. The auditors' report expresses a qualified opinion on the basic financial statements of the Town of
Southeld.
Two significant deficiencies in internal control relating to the audit of the financial statements are
reported in the "REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON
COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS
PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS".
3. No instances of noncompliance material to the financial statements of the Town of Southold were
disclosed during the audit.
Two control deficiencies relating to the audit of the major federal award program are reported in the
"INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD
HAVE A DIRECT AND MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL
CONTROL OVER COMPLANCE IN ACCORDANCE WITH OMB CIRCULAR A-133". One of these
deficiencies is reported as a material weakness.
5, The auditors' report on compliance for the major federal awards programs for the Town of Southold
expresses an unqualified opinion on all major federal programs.
6, There were no audit findings that are required to be reported in accordance with Section 510(a) of
OMB Circular A-133.
7. The programs tested major programs were:
CFDA Number
Name of Federal Proqram or Cluster
10.913
97.036
Farm and Ranchland Protection Program
Disaster Grants
8. The threshold for distinguishing Types A and B programs was $300,000.
9. The Town of Southold was not determined to be a Iow-risk auditee.
-61-
TOWN OF SOUTHOLD
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year ended December 31,2011
FINDINGS AND QUESTIONED COSTS - FINANCIAL STATEMENTS AUDIT
2011-01 RECEIVER OF TAXES - SEGREGATION OF DUTIES (REPEAT FINDING)
Condition
We noted that the Receiver of Taxes is the only authorized check signer, prepares the deposit slips, brings the
deposit to the bank, receives the bank statements, and reconciles the bank accounts.
Criteria
Internal controls should be in place to provide for segregation of duties within accounting functions relating to
cash receipts, check signing and bank reconciliations to reduce the risk of potential errors and fraud.
Effect
Intentional or unintentional errors could be made and not detected.
Recommendation
We recommend that the Receiver of Taxes separates these duties relating to the cash receipts and reconciliation
cycle to another employee so that no one person handles all elements of a single transaction. We recommend
that the Receiver of Taxes duties of preparing the bank deposit, depositing the funds and reconciling the bank
statement be assigned to some other employee in order to establish a proper segregation of duties over cash
receipts.
Manaqement's Response
Due to the small size of the Tax Receiver's office, certain functions have been separated to alleviate the
segregation of duties condition. The Tax Receiver is in the process of training the Deputy Tax Receiver in the
preparation of the bank reconciliations. The Deputy Tax Receiver will also receive the bank statements directly
and then subsequently prepare the monthly bank reconciliations.
2011-02 PURCHASING AND PROCUREMENT
Condition
New York State General Municipal Law requires purchases of similar items to be aggregated to determine if
they meet the threshold for formal competitive bidding or required price quotes. Although the Town has a
system in place to provide accurate historical information to be used to estimate future purchases, during the
course of the audit, we noted several instances where several departments did not obtain and/or retain verbal or
written quotes as required by the Town's adopted Procurement Policy. In addition, there was no evidence that
these departments had secured quotes to document that it was receiving the lowest price for goods or services
purchased. We also noted several instances where the Town did not go out to bid on cedain purchases
exceeding the competitive bidding limits for expenditures incurred by the Buildings and Grounds, Highway, Solid
Waste and Public Works departments, tn addition, we noted several instances where sole source or the
respective NYS or Suffolk County contract numbers were not properly documented on the purchase order.
It was also noted that purchase orders were not in place in one instance where required as per the Town's
adopted Procurement Policy. In addition, we noted several instances where the purchase order was dated
subsequent to the vendor invoice.
Criteria
New York State General Municipal Law requires purchases of similar items to be aggregated to determine if
they meet the threshold for formal competitive bidding or required price quotes.
-62-
TOWN OF SOUTHOLD
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year ended December 31,2011
FINDINGS AND QUESTIONED COSTS - FINANCIAL STATEMENTS AUDIT (continued)
2011-02 PURCHASING AND PROCUREMENT (continued)
Effect
The Town may violate both general municipal law and the Town's adopted procurement policy.
Recommendation
We recommend that the Board ensure that these departments are complying with Board adopted policies and
the requirements of General Municipal Law. We further recommend that to properly document such
compliance, the departments should solicit and retain competitive quotations gathered from a sufficient number
of vendors, as required by the policy and attach all documentation to the completed voucher packet, in
instances where the vendor utilized is a sole source provider, or under a NYS or Suffolk County contract,
documentation of such should be noted on the respective purchase order. We also recommend that purchase
orders are in place in all instances where required as per the Town's adopted Procurement Policy.
Manaqement's Response
The Town is working to put a procedure in place to monitor the aggregation of purchases of similar type items.
In addition, the Town has enforced their procurement policy to the various departments to obtain quotes for
items exceeding the Town's policy limits and to better document on the voucher packet exception items to the
procurement policy (i.e. emergency repair, sole source provider).
FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS
2011-03 PROCUREMENT, SUSPENSION, AND DEBARMENT
Federal Proqram
Disaster Grants - CFDA Number 97.036
Criteria
Per OMB Circular Compliance Supplement it indicates that local governments are required to follow their own
procurement procedures provided they are in compliance with General Municipal Law guidelines. In addition,
non-federal entities are prohibited from contracting with or making sub awards to parties that are suspended or
debarred. Suspension and debarment are monitored through the EPLS (Excluded Parties List Systems)
website.
Condition
We noted one instance where items that should have been public bid in accordance with the Town's
procurement policy.
Effect
The Town may violate both general municipal law and the Town's adopted procurement policy.
-63-
TOWN OF SOUTHOLD
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year ended December 31,2011
FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS (continued)
2011-03 PROCUREMENT, SUSPENSION, AND DEBARMENT (continued)
Recommendation
We recommend the Board ensures that the departments who contract with federal funds are complying with
Board adopted policies and the requirements of General Municipal Law.
Management's Response
The Town will closely monitor the departments receiving federal funds to ensure they are complying with the
Town's adopted procurement policy.
2011-04 FILING DEADLINES FOR AUDITED FINANCIAL STATEMENTS - Material Weakness
Federal ProRram
Farm and Ranch Lands Protection Program -CFDA Number 10.913
Disaster Grants - CFDA Number 97.036
Criteria
OMB Circular A-133 at Section 320(a) states that the reporting package (which includes the audit reports)
must be submitted no later than 30 days after the reports are received from the independent auditors but no
later than nine months after the end of the audit period. The Federal Audit Clearinghouse considers the
submission requirement complete when it has received both the data collection form and the reporting
package electronically.
Condition
The Town did not meet the required September 30, 2012 filing deadline for the audited financial statements
due to the incomplete audit of the one of the Town's component units, Fishers Island Ferry District.
Effect
The Town is not in compliance with OMB Circular A-133 requirements.
Recommendation
We recommend that going forward the Town communicates a strict deadline to its component units to submit
their audited financial statements so that they may be included in the Town's audit report so the Town can file
timely.
Manaqement's Response
Due to the turnover at the Fishers Island Ferry District, the audit was unable to be completed timely and
therefore delaying the filing of the Town's single audit. The Town has communicated this issue to the
management of the Fishers Island Ferry District and they are working on a solution to ensure that future audits
are completed by a particular date in order for the Town to fire their single audit report by the filing deadline of
September 30th.
-64-
TOWN OF SOUTHOLD
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year ended December 31,2011
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS
FINDINGS - FINANCIAL STATEMENTS AUDIT
2010-01 RECEIVER OF TAXES - SEGREGATION OF DUTIES
Condition
We noted that the Receiver of Taxes is the only authorized check signer, prepares the deposit slips, brings the
deposit to the bank, receives the bank statements, and reconciles the bank accounts.
Criteria
Internal controls should be in place to provide for segregation of duties within accounting functions relating to
cash receipts, check signing and bank reconciliations to reduce the risk of potential errors and fraud.
Effect
Intentional or unintentional errors could be made and not detected.
Recommendation
We recommend that the Receiver of Taxes separates these duties relating to the cash receipts and reconciliation
cycle to another employee so that no one person handles all elements of a single transaction. We recommend
that the Receiver of Taxes duties of preparing the bank deposit, depositing the funds and reconciling the bank
statement be assigned to some other employee in order to establish a proper segregation of duties over cash
receipts.
Manaqement's Response
Due to the small size of the Tax Receivers office, the Tax Receiver will evaluate the functions in his
department and segregate the duties as best as possible given the small size of his staff.
Current Status
There has been no change noted for the year ended December 31,2011. The Tax Receiver is in the process
of training the Deputy Tax Receiver in the preparation of the bank reconciliations. The Deputy Tax Receiver
will also receive the bank statements directly and then subsequently prepare the monthly bank reconciliations.
2010-02 TOWN CLERK - SEGREGATION OF DUTIES
Condition
We noted that the Deputy Town Clerk counts the cash, prepares the deposit slips, brings the deposits to the
bank, posts the cash receipts into the system, receives and reconciles the bank accounts.
Criteria
Internal controls should be in place to provide for segregation of duties within accounting functions relating to
cash receipts, cash depositing and bank reconciliations to reduce the risk of potential errors and fraud.
Effect
Intentionat or unintentional errors could be made and not detected.
Recommendation
We recommend that the Deputy Town Clerk separates these duties relating to the cash receipts and reconciliation
cycle to another employee so that no one person handles all elements of a single transaction. We recommend
that the Deputy Town Clerk's duties of preparing the bank deposit, depositing the funds and reconciling the
bank statement be assigned to some other employee in order to establish a proper segregation of duties over
cash receipts.
-65-
TOWN OF SOUTHOLD
SCHEDULE OF FINDINGS AND QUESTIONED COSTS
Year ended December 31, 2011
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS {continued)
FINDINGS - FINANCIAL STATEMENTS AUDIT (continued)
2010-02 TOWN CLERK - SEGREGATION OF DUTIES (continued)
Manaqement's Response
The Southold Town Clerk's Office is a small office with only four clerks who are responsible for certain areas of
expertise. They all wait on the counter and issue permits, licenses, and receive money in order to provide the
best service possible to our constituents. The Town Clerk's office will address and create financial segregation
of duties and develop written policies outlining those functions.
Current Status
This matter has been resolved by the Town.
-66-
CERTIFIED PUBLrC ACCOUNTANTS
To the Town Board
Town of Southold
Southold, New York
, I-f
We have audited the financial statements of the governmental activities, each major fund, and the
aggregate remaining fund information of the Town of Southold for the year ended December 31,2011,
and have issued our report thereon dated December 4, 2012. Professional standards require that we
provide you with information about our responsibilities under generally accepted auditing standards,
Government Auditing Standards, OMB Circular A-133, as well as certain information related to the
planned scope and timing of our audit. We have communicated such information to you in our letter
dated August 3, 2011. Professional standards also require that we communicate to you the following
information related to our audit.
Significant Audit Findings
Qualitative Aspects of Accounting Practices
Management is responsible for the selection and use of appropriate accounting policies. The
significant accounting policies used by the Town of Southold are described in Note A to the financial
statements. One new accounting pronouncement was adopted during the year, GASB Statement No.
54, Fund Balance Reporting and Governmental Fund Type Definitions" which establishes criteria for
classifying fund balances into specifically defined classifications and clarifies definitions for
governmental fund types. We noted no instances entered into by the governmental unit during the
year for which there is a lack of authoritative guidance or consensus. All significant transactions have
been recognized in the financial statements in the proper period.
Accounting estimates are an integral part of the financial statements prepared by management and
are based on management's knowledge and experience about past and current events and
assumptions about future events. Certain accounting estimates are particularly sensitive because of
their significance to the financial statements and because of the possibility that future events affecting
them may differ significantly than those expected. The most sensitive estimates affecting the financial
statements were:
Management's estimate of depreciation expense of $4,382,717 is based on the estimation of the
useful lives of the fixed assets determined by the Town. We evaluated the key factors and
assumptions used to develop the depreciation expense in determining that it is reasonable in relation
to the financial statements taken as a whole.
Management's estimate of the compensated absences liability of $7,487,291 is based on what the
Town will be expected to pay in vacation and sick time when an employee terminates their
employment with the Town. We evaluated the key factors and assumptions used to develop the
compensated absences liability in determining that it is reasonable in relation to the financial
statements taken as a whole.
PERSONAL SERVICE.TRUSTED ADVICE. ·
ALBRECHT, VIGGIANO, ZURECK & COMPANY, PC.
245 PARK AVENUE, 24TH FLOOR 25 SUFFOLK COURT
NEW YORK, NY 10167 HAUPPAUGE, NY11788 3715
T:212792.4075 T:831.4349500 F:831.4349518
www.avz co~r~
Town Board
Town of Southold
Page 2
Management's estimate for landfill closure and post-closure care costs of $969,106 is based on what
the Town expects to pay for the monitoring and maintenance costs of their landfill over thirty years
based on an estimate provided by engineers. We evaluated the key factors and assumptions used to
develop the landfill closure and post-closure care costs in determining that it is reasonable in relation
to the financial statements taken as a whole.
Management's estimate of other post-employment benefits payable of $18,952,909 and the unfunded
actuarial accrued liability of $74,366,808 is based on what the Town expects to pay in medical
insurance costs and benefits to retired employees currently and over the next thirty years, respectively,
based on certain assumptions provided by an actuary. We evaluated the key factors and assumptions
used to develop the other post-employment benefits liability in determining that it is reasonable in
relation to the financial statements taken as a whole.
Difficulties Encountered in Performing the Audit
We encountered no significant difficulties in dealing with management in performing and completing
our audit.
Corrected and Uncorrected Misstatements
Professional standards require us to accumulate all known and likely misstatements identified during
the audit, other than those that are trivial, and communicate them to appropriate level of management.
The attached schedule summarizes uncorrected misstatements of the financial statements.
Management has determined that their effects are immaterial, both individually and in the aggregate,
to the financial statements taken as a whole.
Disagreements with Management
For purposes of this letter, a disagreement with management is a financial accounting, reporting, or
auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial
statements or the auditor's report. We are pleased to report that no such disagreements arose during
the course of our audit.
Management Representations
We have requested certain representations from management that are included in the management
representation letter dated December 4, 2012.
Management Consultations with Other Independent Accountants
In some cases, management may decide to consult with other accountants about auditing and
accounting matters, similar to obtaining a "second opinion" on certain situations. If a consultation
involves application of an accounting principle to the Town's financial statements or a determination of
the type of auditor's opinion that may be expressed on those statements, our professional standards
require the consulting accountant to check with us to determine that the consultant has all the relevant
facts. To our knowledge, there were no such consultations with other accountants.
Town Board
Town of Southold
Page 3
Other Audit Findings or Issues
We generally discuss a variety of matters, including the application of accounting principles and
auditing standards, with management each year prior to retention as the Town's auditors. However,
these discussions occurred in the normal course of our professional relationship and our responses
were not a condition to our retention.
Other Information in Documents Containin.q Audited Financial Statements
With respect to the supplementary information accompanying the financial statements, we made
certain inquiries of management and evaluated the form, content, and methods of preparing the
information to determine that the information complies with accounting principles generally accepted
in the United States of America, the method of preparing it has not changed from the prior period, and
the information is appropriate and complete in relation to our audit of the financial statements. We
compared and reconciled the supplementary information to the underlying accounting records used to
prepare the financial statements or to the financial statements themselves.
This information is intended solely for the use of the Town Board and management of Town of
Southold and is not intended to be and should not be used by anyone other than these specified
parties.
Very truly yours,
Albrecht, Viggiano, Zureck & Co., P.C.
Hauppauge, New York
December 4, 2012
Town of Southold
Passed Adjustments
12/31/2011
Government Wide Financial Statements
Net Assets
Prepaid Expenses
Debit Credit
555,673
555,673
To adjust for overaccrual of NYSERS prepaid expenses in the prior year.
General Fund (A)
Accrued Salaries
Personal Services
103,278
103,278
To adjust for overaccruat of PBA retroactie pay increases for 2010 and 2011
Highway Fund (DB)
Federal Aid 2,365
Federal Aid Receivable 2,365
To adjust for the overaccrual of FEMA funds due to revised reimbursements requests.
CERTIFIED PUBLIC ACCOUNTANTS
December 4, 2012
Honorable Supervisor and Town Board
Town of Southold
Southold, IVew York
In planning and performing our audit of the financial statements of the Town of Southold (the "Town"} for
the year ended December 31, 2011, we considered the Town's internal control in order to determine our
auditing procedures for the purpose of expressing an opinion on the financial statements and not to
provide assurance on internal control.
However, during the audit we became aware of several matters that are opportunities for
strengthening internal controls and operating efficiency. The memorandum that accompanies this
letter summarizes our comments and suggestions regarding those matters. A separate report dated
December 4, 2012 contains our report on significant deficiencies in the Town's internal control. This
letter does not affect our report, dated December 4, 2012 on the financial statements of the Town of
Southold.
The accompanying memorandum is intended solely for the information and use of the Town of
Southold, management, and others within the administration and is not intended to be and should not
be used. by anyone other than these specified parties.
We will review the status of these comments during our next engagement. We have already
discussed many of these comments and suggestions with various Town personnel, and we will be
pleased to discuss them in further detail at your convenience, perform any additional study of these
matters, or assist you in implementing the recommendations.
Very truly yours,
aE ~ , P. La
Albrecht, Viggiano, Zureck & Company, P.C. -
PERSONAL SERVICE.TRUSTEDADVICE.
ALBRECHT, VIGGIANO, ZURECK & COMPANY, P.C.
245 PARK AVENUE, 24TH FLOOR 25 SUFFOLK COURT
NEW YORK, NY 10167 HAUPPAUGE, NY 11788-3715
T: 212.792.4075 T: 631.434.9500 F: 631.434.9518
www.avz.com
INDEPENDENT MEMBER OF BKR INTERNATIONAL
Town of Southold
December 4, 2012
Page 2
JUSTICE COURT -STALE DATED CHECKS (REPEAT FINDING)
Observation
During our audit, we noted that certain outstanding checks for Justice Court accounts were more than
one year old.
Recommendation
To aid in the preparation of bank reconciliations and to reflect an accurate cash balance in the
financial statements, all checks outstanding more than six months old should be investigated and
written-off as and disposed of in accordance with NYS Comptroller guidance.
JUSTICE COURT REPORT FILINGS (REPEAT FINDING)
Observation
During our audit of the Justice Court, we noted that four reports were filed late with the NYS
Comptroller's Office. According to the Office of the New York State Comptroller's Handbook for Town
and Vil/age Justices and Court Clerks, "Reports are due between the 15~ and the 10th of the month, for
every month that you hold office. Reports that are received after the 10t" of the month are considered
late even if they are mailed on or before the 10th of the month. Reports that are received prior to the
15t are premature and may be incomplete if additional cases were heard during that month and were
not included in the report."
Recommendation
The Justice Court should report to Office of the New York State Comptroller timely.
JUSTICE COURT BANK RECONCILING ITEMS
Observation
During our audit of the Justice Court, we noted that there were certain reconciling items on the bank
reconciliation that were not be followed up and adjusted timely and appropriately.
Recommendation
To aid in the preparation of bank reconciliations and to reflect proper cash balances, all reconciling items
should be followed up monthly and adjusted accordingly.
JUSTICE COURT PENDING CASES
Observation
During our audit of the Justice Court, it was determined that in accordance with the Office of the New
York State Comptroller's Handbook for Town and Village Justices and Court Clerks, the Town had a
large number of pending cases, including cases there were over 90 days.
Recommendation
We recommend that the Justice Court review the pending cases to the TSLED report and close down
cases when necessary. Beginning in 2012, the Justice Court now has the ability to suspend licenses
electronically and has recently begun to clear their pending cases.
LANDFILL- DEPOSIT BAGS {REPEAT FINDING)
Observation
During our audit, we noted that the Friday deposits and other weekend shifts are left in the safe until
Monday. All scale operators have access to the safe. It was noted that during the weekend, the scale
operators will occasionally make change with these deposits.
Recommendation
We recommend increasing the amount of cash in the drawers thus eliminating the need for the scale
operators to access the cash in the safe. The deposits from Friday should be deposited or locked in the
safe in the office with limited access to certain individuals in order to ensure these deposits are protected
against theft or loss.
LANDFILL -REVIEW OF VOID REPORTS
Observation
During our audit, we noted that there are no formal procedures in place to review void reports which are
generated as a result of incorrect weight, anon-chargeable item such as leaf disposal, etc.
Recommendation
We recommend the Department Head reviews and approve all void reports in order to ensure that the
void activity for the day is accurate and reasonable.
CAPITAL PROJECTS AUTHORIZATION (REPEAT FINDING)
Observation
During our audit, we noted that in one instance funds were committed through purchase orders for a
capital project which had not yet been authorized by the Town Board. As a result, projects may occur
without the knowledge and authorization of the Town Board and the Comptroller's office. Without
knowledge of all capital projects, required funding may not be available and expenditures cannot be
controlled.
Recommendation
We recommend that all capital projects expenditures be monitored to ensure that the authorization is
in place before funds are committed and expended.
LOG-INS AND PASSWORDS (REPEAT FINDING)
Observation
The Town currently does not require that user passwords be changed on a regular basis due to
limitations in IT personnel and shared directories being maintained on the IBM servers. Due to the
two types of servers being utilized and two different types of operating systems, this would currently
be cumbersome and labor intensive for the limited IT staff.
Recommendation
We recommend that the IT department review the possibility of requiring that passwords be changed
on a regular basis, in order to reduce the risk of access to computer files by unauthorized personnel.
Security could be improved if an "intruder lockout" feature were added to the network so that three or
more incorrect log in attempts would suspend the users account. The IT department would then be
required to reset the account.
In May 2012, with the help of IBM, the Town implemented Kerberos which enables password
compatibility and consistency between IBM and Windows platforms. Now that this protocol is in place,
the Town plans to implement a network password change requirement twice per year.
SEGREGATION OF DUTIES -PROCEDURES OVER MEDICAL CLAIMS PROCESSED BY THE
SERVICE ORGANIZATION
Observation
During our audit, we noted that the Comptroller handles all the phases over the procedures in
processing the medical claims by Island Group Administration including approving the claims for
payment, transferring the cash, and reconciling the bank account.
Recommendation
We recommend that another employee in the Comptroller's office reviews and approves the claims for
payment before the funds are sent to Island Group Administration for payment.